A new startup in Houston is aiming to harness the power of crowdfunding to tackle one of the most alarming economic issues in America today: the $1 trillion student debt load.
BrainFund is the brainchild of Casey Hinson, a University of Houston finance grad and current MBA student of University of Texas’ McCombs School of Business. After graduating with significant debt in 2008, Hinson figured there must be a way to ease the burden on today’s students. He saw in services like Kickstarter the potential to change the way people think about college finance, a way for Americans who want to see the next generation educated but not buried under a mountain of debt contribute money to making that a reality.
“The reason people don’t give [to students] now is there’s no guarantee of making a difference,” Hinson said. “But if I know 100 other people are going to give $10, that makes me feel like I’ve done a really good thing and it didn’t cost me that much money.”
Here’s how BrainFund works: Students create an account and profile page listing their school, major, minor, GPA, and amount of money requested for a semester’s needs. Prospective donors can then browse the database of students by any of these criteria and, once they’ve created their own account, donate a “micro-scholarship” of anywhere between $10 and $2,000 to any students they choose. They can then follow a student’s progress on their profile page showing how much they’ve received in donations (and from whom), how much more they need to reach their goal, and how long they have until the new donation period ends.
“Basically we’ve come in and given students a new college financing option, and we’ve given America a new option. And that option is to help students directly while understanding that a small gift, along with all the other small gifts, is going to actually make a big difference for a college student, and that’s the key: giving them that platform,” Hinson said.
Once the family and friend donor pool has been completely tapped, Hinson said the students’ profiles may largely determine how successful they are in attracting donations from strangers. They’ll be able to post a bio, keep a blog, upload videos, and eventually even post grades (if they choose) to market themselves and convince donors that they are worth supporting.
Hinson said, “We’re focused around three main pillars: community, responsibility, and trust. It’s all about the students taking responsibility for their own financial futures and the community surrounding them and supporting them in that effort.”
Trust is an important part of the BrainFund equation. All students will have their college enrollment verified upon signing up and twice more during each semester to ensure “students” receiving donations are in fact students. But donors will still largely have to take on faith that students are spending their gifts on school-related expenses, a fact that doesn’t bother Hinson.
“How do you know [traditional] scholarship funds are used by students for college expenses? You don’t. … We can assume they’re are not using student loan money to buy beer, so we can go ahead and put an element of trust into this. If you feel like your money is being used correctly, then keep donating to that student. If you don’t, you have the choice whether you want to continue helping that student or not.”
As for the question of whether a service based entirely on charitable giving can survive in a recession, Hinson is similarly unperturbed.
“People always give in a tough economy,” he said. “In America, it’s proven. The one thing people always like doing is feeling good about giving to a cause that is worthwhile. People will see that giving in a down economy is actually going to boost the economy in the long term because the education of our students, our future generations, underpins what we’re all about and that’s what’s going to spur donors.”
Hinson and his partners have high hopes for the project. He said if they can reach $1 billion in funding for students, they will have succeeded. As for how many students will become users, he thinks 10% of the nation’s current 20 million over the next five years is a good target. For some of these, BrainFund will only supplement their college funds, but Hinson believes for many it will allow them to graduate totally debt-free.
He also said once the site gets some momentum they will branch out into educating both students and donors on responsible money management through newsletters and tips on the website. And there are plans for changing the destination for donations from students’ PayPal accounts to having funds directly applied to their college accounts.
“Like any startup we have a great product right now,” he said. “We’re just going to make it better as we go.”
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