"It was untested," she said of the Upstart model. "But it was appealing, too. ... Every startup has that risk, right?"

Not everyone can get SoFi or Upstart funding; SoFi determines eligibility through credit scores and other financial factors. Upstart requires good credit and a favorable debt-to-income ratio, and it takes into account applicants' standardized test scores and other "indicators of future success," according to Bradford, to determine how much funding they can get.

"Those two startups are basically geared toward Ivy League students," said Casey Wallace, co-founder of education crowdfunding startup Piglt. "If you went to a state college, you're probably not going to end up getting that person's investment." (SoFi works with alumni of 100 schools, some of which are state universities.)

To Stephen Dash, the Internet has been a democratizing force. The former JP Morgan investment banker founded joinStampede, which in March gathered more than 30,000 borrowers to collectively refinance private student loans. Each borrower who refinanced saved an average of $6,038 over the life of his or her loan, according to Dash.

None of it would have been possible without a certain level of comfort with social media.

"Five years ago, the joinStampede campaign would have been a disaster," Dash said. "It wasn't too long ago that people didn't trust putting an email into a website."

Despite the potential upsides of creative loan financing, the underlying problem of student debt remains unsolved, observers say.

"The cost of college has gotten out of sync with what most people can afford," said Long, the certified financial planner in Wicker Park. "There's a structural disconnect between the colleges and the students and the parents' ability to pay for that. We shouldn't have to resort to people begging on the Internet or selling their future earnings off to investors."

Student loan startups to know:

SoFi

Launched: Fall 2011

How does it work? Alumni of certain schools pool their money so students and recent graduates of those schools can apply to have their loans paid for with money from that pool; the alumni then lend the money back to the borrowers at lower rates.

...

Piglt

Launched: August

How does it work? "Dreamers"—people or organizations looking for education-related funding—create profiles to ask for money and promise rewards in return. Minus processing fees, all the funds raised for student loans go directly to the loan financers, rather than the borrowers.

...

joinStampede

Launched: March

How did it work? Gathered 30,000 people to bargain for refinancing private student loans at lower interest rates. After eight weeks, some of them were able to get refinancing through CU Student Loans, a group of not-for-profit credit unions.

...

Upstart

Launched: April 2012

How does it work? Potential borrowers raise money on the Upstart platform and then agree to pay their backers a certain percentage of their incomes for a set number of years.

 

mcrepeau@tribune.com | @crepeau