How To Bet Money On Your Future Success 188
waderoush writes "Say you're in your early 20s, you're finishing college or graduate school, and you're smart but poor — and you've got some big student loans hanging over you. You're pretty sure that within 10 years you'll be selling your first startup or earning a high-six-figure salary. But you need some money *now* so that you can actually start the company, and avoid taking a corporate job. Shouldn't there be a way to calculate how much you'll be worth, and borrow against that promise of future success? Upstart, a new Palo Alto investing operation founded by a group of ex-Google employees, thinks the answer is yes. In a new spin on the crowdfunding model, the organization gathers data from recent graduates such as schools attended, academic transcripts, job offers, and credit scores. Its 'pricing engine,' based partly on techniques developed to assess job applicants at Google, determines how much each aspiring 'upstart' should be allowed to raise from investors per each percentage point of their future income. Upstart has already helped 35 young people raise amounts varying from $10,000 to $170,000; the upstarts, who must pay the money back over a 10-year period, say they're using the funds mainly to retire student debt or bootstrap startups. 'We can look at a 25-year-old and very quickly assess whether he or she would be successful at Google,' says Upstart founder Dave Girouard, formerly the head of Googles $1 billion enterprise apps division. 'My whole thesis was, if you could use the same algorithms to predict whether he or she would be successful beyond that, in the business world, that would be pretty useful.'"
Re:why borrow to repay student loans? (Score:4, Informative)
Well, student loans are virtually impossible to discharge through bankruptcy [wikipedia.org], which is presumably not the case with these loans, so they are a great deal for the student that doesn't plan to actually pay the money back (probably less great for the lender).
wish I had mod points (Score:4, Informative)
Okay, so I did sell a business or two, but once the IRS was done with that
Re:This is the dumbest idea (Score:5, Informative)
Yea, but you are probably ignoring what you get back come tax time? I know my school loans don't look too low on paper either (6-9%), but after taking the tax deductions, I'm really only paying about 1-2%.
That is simply a rediculous statement. First off it only allows you to take deductions, which returns to you a maximum of 25% of your interest payment. That means that even if you are getting a 6% rate the deduction only reduces that to 4.5% (not 1-2%).
And if you are actually successful after graduation, you probably won't even get the deduction because it starts phasing out at only $55k modified AGI.