Think your college education is an investment? So does MyRichUncle.com, which offers help for cash-strapped students. It sounds pretty good, but there's a catch: in exchange for financial support, the website's customers agree to fork over a percentage of their income after graduation.
MyRichUncle coordinates national investors interested in financing college education, who recoup the partial tuition subsidies given by taking a portion of a student's salary for 15 years after he or she graduates.
The percentage of income paid varies depending on projected earnings. Those students with higher income forecasts will have lower rates than those with lower projections.
"The rates are done on a per $1,000 basis," explained Raza Khan, co-founder of MyRichUncle's parent company, Iempower. "Most students pay on average between 0.10 percent and 0.40 percent for every $1,000 of funding."
But according to Director of Financial Aid Virginia Hazen -- who was not specifically aware of MyRichUncle when contacted by The Dartmouth -- such programs present potential risks.
Depending on postgraduate earnings, students involved in such programs might end up paying more in the long run than on a loan, she said.
"I'd be a little concerned about it, given what a Dartmouth student is likely to earn," Hazen said.
Khan, however, was more optimistic about the future of such education financing. "The general perception is that those that help me pay for my education are entitled to a portion of my returns," he said.
"It's very interesting, from an investor perspective, that investors can invest directly in the future generations of America," he added. "More and more wealth is directly created from our individual efforts."
Khan co-founded New York-based Iempower in 1999 with his friend Vishal Garg. The company focuses on investing directly in individuals.
"Education was the best place to do this since there was such a dire need for new financing options," Khan said.
As an investment firm, MyRichUncle examines as many factors as it can to determine the projected earnings -- and thus the potential rate of return -- from each student applicant. Factors include academic history, financial standing and work experience.
"The first year, we [gave funds to] roughly 65 students, deploying roughly a million dollars," Khan said. This year, he expects to deploy funds to between 500 and $1,000 students, based on the number of applications submitted to the website.
Khan could not give a more precise estimate of this year's figures, since the company's operations were interrupted for a time when their office in the World Trade Center was destroyed.
So far, he said, all students who are now making payments have been on time. Students who make tardy payments are subject to fees.
Students who attend graduate school or participate in volunteer activities such as the Peace Corps after leaving college will have their payments deferred, Khan said.
There are several stipulations to receiving funding, however. Students currently at college cannot apply for the money, and eligible students must have been accepted to a school and must then be accepted into the program.
Khan expects Iempower and MyRichUncle to "open the floodgates of capital," though to date he knows of no other companies that invest in individuals.
