LM: A website that helps students find lenders for interest-free loans up to $2,000: June 15, 2009

 

In the photo, the young person’s eyes are brown and kind-looking. She is in need of financial help. A new website that brings together the charitable minded and those in need has posted the details of her request.

 

This is not one of those arrangements where donors can sponsor a needy child or a sorghum farmer in the developing world. The person asking for help is a 21-year-old neurobiology major at Harvard, and she is requesting a loan from Harvard alumni.

The appeal of direct donor-to- student loans is that alumni will have a personal connection to current students “This summer I plan to take the MCATs, and I currently cannot afford the registration fees or the adequate preparation materials that are necessary to pass the exam,” wrote the young woman, who maintained her anonymity to shield her financial situation from those not afforded access to the website of Unithrive.org. “Thus a loan from Unithrive would help me out a lot.”

 

Unithrive, which made its debut last month, matches alumni lenders and cash-strapped students, who post photographs and biographical information and can request up to $2,000 (Rs94,800). The loans are interest-free and payable within five years of graduation.

The non-profit site is the brainchild of three recent Harvard graduates, who hope it can help ease the crisis in paying for college, especially if it is one day rolled out to other colleges that cannot afford to be as generous as their alma mater, which already awards scholarships to all students with demonstrated need.

 

The appeal of direct donor-to-student loans, Unithrive’s founders say, is that alumni will have a personal connection to current students: those requesting loans list hometowns, majors and classes they have taken. They are promised updates three times a year from students they support —not unlike the letters that sponsors of poor children in Africa receive through the Christian Children’s Fund. In this case, however, the pitch for the charity is not being delivered by a tearful Sally Struthers but by the three founders: Joshua Kushner, who graduated last year and is a scion of a wealthy real estate family (his older brother, Jared Kushner, bought The New York Observer shortly after he graduated from Harvard), Nimay Mehta and Tanuj Parikh, who graduated this month.

Harvard’s deep-pocketed alumni already support a roughly $29 billion endowment, which finances one of the most generous scholarship programmes in higher education, promising full tuition to students whose families earn less than $60,000.

 

Kushner noted that the college still asks scholarship students to contribute a few thousand dollars a year from summer and school-term jobs.

“I have friends who would spend 10 hours a week when they are not in class working at a coffee shop or in the dorms,” said Kushner, 24, referring to time that he considered wasteful. “I think the most special thing about college is not just what you do in class, but what you do out of class.”

 

The three young men began their non-profit loan programme at Harvard because they have a ready pool of alumni friends willing to write cheques. So far, 73 of them have signed up with Unithrive, and eight students have posted loan requests in the four weeks since the site went live. (It is accessible only to those with a Harvard student or alumni e-mail address.)

While Unithrive wants eventually to increase the maximum amount students can borrow, the $2,000 current top loan covers most of what Harvard scholarship students are asked to contribute from a job.

 

A university spokesman, Joshua Poupore, said that money from any loan, including Unithrive’s, would not affect the formula used to determine the amount of financial aid a student receives.

He noted, however, that the need for loans has lessened. As Harvard has raised financial aid in recent years, the debts owed by graduating students sank to an average of $8,000 for the class of 2008 from $16,500 for the class of 1999.

 

Brian Feinstein, 24, who graduated in 2007, said he lent $50 to a student on Unithrive because she is from East Longmeadow, Massachusetts, and has the same major he did. “I lived in Longmeadow for a while when I was younger,” said Feinstein, now an analyst at a venture capital firm. “I found commonalities with her background.”

Many of the alumni lenders agreed to join on the condition that their names be kept confidential except to others authorized to visit the Unithrive site. The lenders include some famous family names, children of well-known parents from the worlds of media and finance. So far, the alumni have lent about $4,500 to the nine students who have uploaded profiles.

Unithrive was inspired by the peer-to-peer loan model of online groups such as Kiva.org, which lets lenders browse profiles of borrowers in the developing world, offering as little as $25 towards projects like helping a farmer buy fertilizer to increase crop yields.

 

Started in 2005, the non-profit Kiva says that it now lends about $1 million a week interest-free and that 97.8% of loans are repaid.

Like Kiva, Unithrive uses crowd-financing, which pools a number of lenders to meet an individual’s total request. While Kiva channels money to borrowers through microfinance institutions in their home countries, Unithrive plans to pay its loans directly to a university as part of a student’s tuition, which will reduce the bill.

 

A Unithrive request does not have to be purely academic. Ricky Kuperman, a student borrower who just finished his sophomore year at Harvard and is an accomplished dancer, said in an interview that he wanted the $2,000 no-interest loan to visit Okinawa, Japan, in 2010 to spend time in the birthplace of karate. “If I don’t get the money, I will have to work longer next summer or during the term,” he said. “It will allow me to stay in shape and make getting cast in films or in dance projects that much more possible.” Students sign a contract agreeing to pay back the loan. If they default, this will be reported to credit bureaus and will effect their credit rating, said Mehta, 21.

 

The president of Kiva, Premal Shah, is a cousin of Parikh, 21. He advised Unithrive, but is uncertain of its prospects. “Are they going to be the next big thing that comes out of the dorms at Harvard?” Shah said. “It’s a huge, huge idea to democratize financial aid. It’s really cool.” But he said Kiva itself is one of the biggest challenges Unithrive faces: On 10 June, Kiva announced that it was expanding its lending to entrepreneurs in the US. It plans eventually to offer loans to students for college and vocational schools. “Some people might want to fund a yogurt maker in Senegal, but someone might want to fund an 18-year-old in

South Boston who wants to go learn a skill or a trade,” Shah said.

Where Unithrive could outflank Kiva is its focus on mentorlike connections between alumni and students, said Mikolaj Jan Piskorski, a professor at Harvard Business School, who consulted on the project. “A lot of our alumni feel like they have gotten a lease on life by going to a university, and they want to give their donation to a student and feel it is being used by someone who needs it rather than by an administrator,” he said.

 

Some experts said getting students to pay back the loans could be a challenge. The reason the repayment rate for Kiva is so high, said Suresh Sundaresan, a professor at Columbia Business School who teaches microfinance classes, is because if farmers in the developing world do not repay their small loans, their only remaining options for credit are usurious local money lenders.

Harvard graduates, presumably, will have better options.

 

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