Selling Their Futures: College Grads Promise a Slice of Their Future Income for Cash Now


The start of Nathan Sharp’s story sounds familiar: In 2012, he found himself graduating from Dartmouth College with an MBA and $100,000 in student debt. But rather than take whatever job would help him make his monthly payments, the entrepreneurial-minded Sharp took $50,000 from backers using a start-up called Upstart — and agreed that in return he would give his investors a portion of his future income.

Think of Upstart as Kickstarter (the online funding platform) meets the government’s Income Based Repayment program, which caps loan payments at 15% of discretionary income. Founded by Google‘s former head of enterprise, Dave Girouard, Upstart is the latest initiative aimed at getting young people to strike out on their own before the responsibilities that come with a family and a mortgage set in. “They’re at a good time in their lives to take risks,” Girouard said. “But a lot of times, even when students have something interesting they’d like to do, they say ‘I’m going to accept this job…’ and its usually for very pragmatic reasons.”

“Universities are really well set up to help students go down the traditional path—it almost happens by default,” Girouard continued. “That struck me as a misallocation of capital in a sense because for what amounts to a relatively low amount of money—$20,000 to 30,000 in debt—kids are making decisions that are probably going to change the entire course of their careers because often when you get onto the treadmill of the corporate job path, you never get off.”

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Upstart encourages students to go their own way. This is how it works: Beginning in the spring of their junior year, college students or recent grads—anyone from a poet who wants to start a literary magazine to a business major looking to build a boutique hotel in Brazil—can apply to be an “upstart”. The applicant is screened to make sure they are who they say they are and the company predicts how much money they will make over the next decade. That information becomes their funding rate, which helps determine how much they can borrow and how much they will need to repay. On average, for every $6,000 a student wants to borrow, they must pay back 1% of their income. (Right now, Upstart is very selective about the students it accepts—they want people with high-quality profiles and clear goals—but in the future Girouard says they would like less of the arbitrar of who is funded, so long as a set of minimum requirements are met, and let the marketplace decide.)

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