Sunday, April 5, 2009

Paying back college loans based on percentage of salary

Posted by Amina Isakovic
Written by: N/A,

Here's a brilliant notion: let college students pay back their college loans based on a percentage of their actual income. Lumni has figured out how to do this—while earning a profit for investors who make the loans—relieving students of the stress of making exorbitant loan payments after graduation and giving them some flexibility in how much they must earn.

Lumni gives colleges loans to students who agree to pay a monthly loan payment based on a percentage of their salary for a pre-agreed number of months. Students who land jobs with high salaries after they graduate may end up paying more than the value of their loan. But this compensates for other students whose payments may fall short of their loan amount (plus interest) because they are earning lower salaries.

The idea works: altogether, Lumni’s loan pool has earned an average 9 percent interest for its investors. Lumni plans to double the number of its student loans in 2009 from 150 to 300.

After pioneering this idea in Colombia, Chili, and Mexico, Lumni will expand to the United States this winter where it will set-up several loan funds that are targeted to investors’ particular interests, such as a funding students at a graduate school business program in Pennsylvania, or students with physical disabilities.

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