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| Student Sponsorships |  Sponsorships are widespread in Europe, where private patrons finance students from the local community. In the United States sponsorships are not popular. European students talk about "finding a sponsor" while US students talk about "finding a scholarship".
Some private investors pay for the college education of students, in exchange for a fixed percentage of their annual income for a fixed number of years after graduation. For instance, a student might get $10,000 in funding in exchange for 2% of the student's income for ten years after graduation. In fact, these patrons are investing in the student's future potential.
To apply, the student provides a detailed questionnaire where he/her describe his/her educational background, work experience, intended academic major, and colleges. Typical payback rates vary from 0.1% to 0.3% per year per $1,000 in financing. Investors can demand a fee of 2.5%, which is deducted by the investor from the amount of financing received by the student.
Private investors can be a competitive alternative to education loans. It is a good decision for students who fear debt or are concerned about their ability to repay student loans in a tight job market. Students find it easier to plan for their financial future since the income percentage is a fixed percentage of income. In fact, the investor is undertaking the risk that the student will be able to find a nice job, allowing the student to stay calm in addition to funding. It is very comfortable to have fixed percentage of income, because the payments automatically adjust during low-income periods.
It is difficult to compare private investors with student loans, because the student is not required to repay the original investment and does not pay interest on the principal. Instead, the student have to pay a fixed percentage of income during ten years after his/her graduation. The student has not any further obligation when his/her ten year period is over, even if the amount repaid is less than the original investment. However, the cost of the private investors funding normally appears to be somewhere in between the cost of federal education loans and private alternative education loans. Cost is fixed as the difference between money paid by the student and money received by the student on a net present value basis. This means that private investors funding is competitive with private alternative education loans. Remember that private loans often need a parent to co-sign the obligation, while private investors funding does not. Note that not all students who apply will get funding.
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