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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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.
-
The Stoic Retirement: Ancient Wisdom for Today's RealityA "Stoic retirement" doesn't mean depriving yourself. It's a character-based approach to life and aging that can bring calm and clarity.
-
My Teen Crashed His Car and Now Our Insurance Has Tripled. What Now?Dealing with the costly aftermath of a teen car accident is stressful. Here are your options for navigating it.
-
11 Outrageous Ways To Spend Money in RetirementWhether you have excess cash to spend or want to pretend, here’s a look at 11 ridiculous ways retirees can splurge.
-
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 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
-
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 Does Amazon Prime Day End in October? Everything We Know, Plus the Best Deals on Samsonite, Samsung and MoreAmazon Prime The Amazon Prime Big Deal Days sale ends soon. Here are the key details you need to know, plus some of our favorite deals members can shop before it's over.
-
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.
