Community-based school loans might be the answer
A recent Daily Finance article discussed a growing number of community associations springing up around the country, offering community-based school loans that are being made to students heading off to university, albeit without a ton of details. However, the MarketWatch article Daily Finance quoted did have a few more details.
It’s not dissimilar to the more recent phenomenon of “crowd funding” or “crowd sourcing,” in that donors are solicited for funds. They throw a certain amount into a communal pot, from which loans are made.
The Canton Student Loan Organization of Canton, Ohio has lent $27 million to over 5,000 students since 1922 when it was first started, meaning the idea is not a brand new one.
However, just like crowd funded personal loans sites such as Lending Club or Prosper, those loans do have to be repaid with interest.
Less than private or public
The community-based student loans fit between federal school loans and private loans with regards to cost, according to Daily Finance, Bankrate and MarketWatch.
The Consumer Financial Protection Bureau got 46 percent of its student loan grievances from Sallie Mae, which is pretty e costly for private loans. You can also get private loans from a credit union or community bank, though they are typically cheaper.
Private loans could be as high as 16 percent interest, and federal Stafford loans almost always have the very best rates. Community-based loans generally are much harsher and require massive forms of collateral, according to MarketWatch, but interest can range from no interest at all to around 8 percent.
Paying for the rest
According to Bankrate, community-based school loans is probably not enough to pay for the total cost of college, but just enough to cover tuition and books. Many of these organizations just don’t have the cash to lend the federal government or big banks do.
A “personal loan for educational purposes” could possibly be provided by credit unions in the same way, and the terms would be better than if you were to go to a private lender. Students and parents need to do the work to figure out which program will work best for them. According to CBS, there are loan consolidation programs at credit unions that could be worth checking out.