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Reaching
out to that rich uncle of yours to help pay college
costs may be a wise financial move (even if you
don't have an uncle!).
MyRichUncle Offers an Alternative to a College
Loan
By Rochelle DelGaizo Billera
June 2001
The CollegeBound Network NewsClick -- Imagine
having a rich uncle who you've never met that's
willing to loan you money toward your college
education. Sound like something you'd appreciate,
right? Well, we've found a rich uncle just for
you: MyRichUncle.com (MRU).
MRU is not a traditional
student loan. It's "an educational investment,"
used as an alternative to student loans for some,
and for others, a "gap-filler" -- to
finance the remaining cost after financial aid
and loans have been applied, says Raza Khan, co-founder
of MRU.
"Many students
choose not to go to the school of their choice
or not to attend college at all, because of finances,"
says Khan. "This has a very negative impact
on the future of their lives. Our idea was to
come up with an innovative idea to offer students
'alternative academic financing, for greater career
choices later on."
Here's how it
works:
You apply for money
that doesn't exceed 15 percent of your projected
future income (calculated by using rates based
on research and analysis). If approved, the money
is paid to the school on your behalf.
Over a 10- to 15-year
period after you graduate, you are expected to
pay "a fixed rate," that's based upon
the amount borrowed -- between 0.1 to 0.4 percent
of your gross annual salary (depending on how
much you earn). There's
no principle or interest added to the funds. If
at the end of the payment period, you haven't
paid off the entire debt, you don't have to pay
any more money and you aren't penalized.
"[Since] you
are paying a fixed percentage of your income,
your payment obligation is always in line with
your ability to pay. In other words, you'll pay
less when you earn less, more when you earn more,
virtually eliminating the risk of default,"
says Khan.
Although this college
cash option may sound "too good to be true,"
it's actually legitimate. However, you should
be aware of some upfront policies. First, there
is an origination fee for service -- 2.5 percent
of the borrowed amount. Secondly, you are required
to pay the specified "fixed rate" for
the duration of the allotted time once you sign
the contract. In other words, you may actually
end up paying more than you originally borrowed
if you start drawing a high-end salary. Thirdly,
if at any time you default on your agreement,
you will get a bad credit rating.
Out of work? Out
of luck! You still gotta' pay... though MRU may
consider temporarily adjusting your payments through
its deferment plan. Also, late fees will be added
on for untimely payments.
Getting money to pay for school isn't always
easy. Just make certain you do your research,
read all the fine print, know what you're getting
yourself into, and trust your instincts. And remember,
you do have options!
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