When Nathan Sharp took out a loan to launch his price-tracking site, Nifti.com, he didn't agree to pay back principal plus interest. Rather, he's paying 2.5% of his salary for ten years to backers he met through the money-lending platform Upstart. The arrangement includes guidance from his sponsors. "It made sense from a financial and mentorship perspective," says the Boston-based Sharp.
Borrow now and repay a cut of your income later: It’s a new trend as student debt overwhelms starting salaries. Borrowers with Upstart pay up to 7% of their income for a decade, capped at five times the original loan amount. If their salary falls below $30,000, they get a pass, with skipped years added to the repayment term.
Upstart, based in Palo Alto, Cal., is one of several such platforms. States are getting into the act, too. Oregon's Pay It Forward, Pay It Back is slated to start in 2015. In exchange for paying no tuition or fees, graduates of state schools will pay a proposed 3% of income for 24 years. California and Pennsylvania are considering similar plans.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Such loans sound affordable, but as income grows, they can cost a lot more than traditional student or other loans. "Borrowers aren't going to starve because of these loans," says Jonathan Frutkin, CEO of Cricca Funding, a crowdfunding consulting firm. "But they may hinder saving for vacation, buying a house or putting away money for retirement." A better bet: Focus on affordable college options in the first place.
-
Ask the Editor — Tax Questions on the New Senior DeductionAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new $6,000 deduction for taxpayers 65 and older.
-
These Summer 2025 Back-to-School Tax-Free Weekends Are Starting NowSales Tax Over a dozen states offer back-to-school shoppers a sales tax holiday this summer.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Is Amazon Prime Day? Everything We Know, Plus the Best Deals on Apple, Samsung and MoreAmazon Prime Amazon Prime Day is four days this year. Here are the key details you need to know, plus some of our favorite deals to shop during the sale.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
