More Students Turn to GoFundMe to Pay for College
To our readers: Today GoodCall® writer Terri Williams takes a closer look at some alternative ways students are paying for college. Earlier, she examined income-share agreements, including reasons why some students and parents don’t like them. Now, she delves into the growing use of GoFundMe.
While college continues to be a good investment, the cost of attending an institution of higher learning continues to rise. Tuition has typically been identified as the culprit, but college fees can account for up to 20% of the total cost. Instead of incurring staggering levels of student-loan debt, some students are now turning to GoFundMe as an alternative way to finance their education.
How many? GoFundMe says that in the past three years, more than 130,000 accounts have been set up to raise money for college tuition and other school-related costs. More than 850,000 donations have been made, generating more than $60 million, it says.
In fact, GoFundMe even has a guide, “How to Run a Successful GoFundMe Campaign for College Expenses.” The guide includes advice for setting up the campaign, tips on designing a page, ways to promote the campaign, and tips and ideas for fundraising. It also lists profiles of students who have been successful in their campaigns.
GoFundMe the next trend in financial higher ed?
“With student loan debt accounting for over $1.4 trillion and growing at a rate of over $2,800 per second, it doesn’t surprise me to hear that students are turning to GoFundMe accounts,” according to David Almonte, co-founder of FountainHead RI.
“While I think of GoFundMe accounts more in the sense of helping out a loved one, friend or stranger going through a tough time or donating to a local community call for action, if utilized properly and for the right reasons, GoFundMe accounts can certainly be another tool to help students finance their education,” he tells GoodCall®.
However, Almonte cautions students against relying on GoFundMe as the sole source of financial aid. Students have experienced varying levels of success, and often the circumstances surrounding the appeal play a crucial role.
For example, in 2014, a Chicago television affiliate reported on a student at Vanderbilt University whose mother committed suicide and whose father lost his job. After she could not receive financial aid for her sophomore year, the student turned to GoFundMe to raise the $25,000. She met that goal in 24 hours, and within four days, the campaign raised more than $40,000.
However, some students are far from meeting their financial goals. In five months, one student has raised less than $4,000 of a $20,000 goal to stay in college. A mother, trying to raise $15,000 for her daughter’s college expenses, has only raised $776 in 25 months.
Students who don’t meet their goals in time may decide to take out a student loan and use the GoFundMe donations to pay off the loan. However, Almonte urges students to think carefully about their reliance on these types of campaigns. “The biggest piece of advice I can give is that the student loans borrowers take out to pay for secondary education are no one’s responsibility but their own.”
And before students sign on the dotted line to get a loan, Almonte says it’s important to consider the long-term consequences. “Decisions over student loans can end up costing individuals thousands of dollars in the long-term in terms of interest payments and paying dollars back that could have been reduced by researching scholarships and applying for grants.” And this massive debt may result in students delaying major life decisions, such as getting married, purchasing a home, or saving for retirement.
Legal issues and additional costs
For people who want to contribute to a student’s college costs, Bradley S. Shear, Esq, managing partner at Shear Law, recommends that they use another method. “If you personally know the student who is requesting assistance via a crowdfund platform, it makes economic sense to provide them assistance directly instead of sending them a donation via a crowdsourced platform because of the fees charged,” he says.
Shear says anywhere from 8 percent to more than 10 percent of the donation will go to the site. “For example, 5 percent to 8 percent of the funds may be an administrative fee, and there may be a credit card processing fee, which may eat up 3 percent or more, and there may also be a per donation transaction fee.” He tells GoodCall® that some platforms may charge higher fees, so he advises donors to read and understand the small print before making a donation.
So what about students who set up a “college tuition” crowdfund platform and then use the funds for another purpose? “While the FTC has gone after multiple people who have not followed through with their crowdsourced promises, its ability to obtain financial satisfaction for wronged donors is generally limited because most of the scammers are not able to make financial restitution.” Shear concludes, “The bottom line is that you must trust the student you want to support.”