- EdAid lets people crowdfund interest-free student loans. Around 100 students have used the service so far. “We want to level that playing field,” founder Tom Woolf tells Business Insider.
LONDON – UK Prime Minister Theresa May pledged on Wednesday to cap university fees at the current level in a bid to “woo” younger voters, but it may prove more difficult than that.
University tuition fees are already at an eye-watering £9,250 a year and rising interest levels, currently 6.1%, mean most students can expect to spend decades paying off their debts.
That is where EdAid comes in. Founded in 2015 by Tom Woolf, a former professional athlete and a Nike ambassador, the firm aims to tackle the problem of student debt by allowing students to crowdfund interest-free loans to see them through university.
“It’s taking the idea of the Bank of Mum and Dad and extending that out to friends, family, colleagues, and potential employees,” Woolf told Business Insider.
Students from low and middle-income backgrounds often resort to expensive overdrafts, credit cards, and pay-day lenders because their parents do not have the private means to bankroll their university education.
“We recognise that funding is a major pinch point, and that those who have the least access to opportunity are also punished hardest by expensive credit cards, expensive overdrafts and payday lenders. We want to level that playing field,” Woolf said.
Once applicants to the scheme pass background checks and meet affordability criteria, the firm allows them to create a crowdfunding page – like a Kickstarter or JustGiving page – on EdAid’s site and appeal to friends, parents, grandparents, and colleagues to bankroll the cost of their university fees and living expenses.
If a student is successful, EdAid pays the loan out as microloans over the course of a university education, with EdAid taking an initial fee. The money pledged is a loan, not a gift, but it is interest-free and index-linked to consumer inflation, so lenders earn their money back in real terms.
It is still early days for the firm – it only received its trading licence in May and around 100 students have successfully crowdfunded on the platform so far.
Woolf hopes EdAid will be useful to a growing pool of middle and lower-income Brits who feel unable to afford government loans. He says one of his principal objection to student loans is the fact interest rates are tied to the retail price index (RPI), an inflation index which tracks house prices.
“The linkage of student debt to the RPI and house prices is morally unjust given that there are very few graduates are benefiting in today’s money from rising house prices – so why have they chosen RPI?” he said.
“Why are all students punished at university with the full highest interest rates despite the fact none of them are earning?”