(Image: Thinkstock)

If you’re ready to get your finances in tip-top shape for the New Year, there is one simple strategy that can help you achieve economic security and success.

The strategy is to ask yourself these “What if?” questions, and then come up with a preventive or proactive solution.

“What if”:

1. I lose my job (Would you consider entrepreneurship if no one re-hired you?)
2. I lose my spouse through death or divorce (Does he or she have life insurance; or do you have a prenup and credit in your own name?)
3. I don’t get that raise or promotion (Would you regret overspending?)
4. I don’t make as much money as I thought I would make (Would you still be able to pay off all those hefty student loans?)
5. My car gets involved in an accident? (Would you have the car insurance you need?)
6. I get sick (Would you lament being uninsured and having no healthcare coverage?)
7. My child needs surgery (Would medical bills drive you into bankruptcy?)
8. I lose my wallet or my credit cards and personal information get stolen? (Would you wish you had looked into identity theft protection?)
9. I lose a big chunk or all of my savings/investments (Would you wish you had hired a financial advisor?)
10. I am sued (Would you know how to deal with a lawsuit or court action?)
11. My house is destroyed (Would you be covered with homeowners insurance to rebuild and know how to avoid contractor scams?)
12. My home needs a major repair (Would you have the extra cash needed to fix things?)
13. My taxes go up (Would you know how to lower your income taxes or slash your property taxes)?
14. My mortgage or rent payment goes up (Would your know whether to walk away from your residence?)
15. I am fined (Would you know how to earn additional money to avoid living paycheck to paycheck?)
16. My ex stops paying his child support (Would you know how to get child support that’s rightfully due?)
17. The court orders me to pay someone else (Would you have to withdraw IRA or 401(k) retirement funds to satisfy this obligation?)
18. My wages are garnished (Would you know how to stop wage garnishment?)
19. My employer asks me to relocate…or else (Would you have other job or career options?)
20. Financial Armageddon happens…and the economy has a repeat of 2008 (could you and your family survive yet another recession?)
21. The Mayans were right (The Mayan Prophecy suggests a cataclysmic or world-ending event will occur on 12/21/2012. If they’re right, what will your financial afterlife look like?)

OK, so I just threw that last one in there for shock value. But I hope you get my point: The single best financial strategy anyone can ever take to prepare for the future is to do some contingency planning.

You Need a Financial Plan B. If any one of these things listed above happened to you, how would you cope?

If you’d be financially sunk by any of these personal and financial challenges, it’s time to stop procrastinating and get serious about fixing your money problems and creating an economic backup plan. Today is as good a day as any to get started.

Do you have a solution to any of these dilemmas or did any of these things happen to you already? Sound off on this topic.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox, co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

For those of you who are parents, it’s understandable that you want to help your child avoid the plague of student loan debt, but there’s a right way to go about doing it and a wrong way.

The wrong way is to completely sacrifice your financial future, forgoing retirement savings and just “hoping for the best” when you’re in your Golden Years. The right way is to approach college with some smart financial planning. Take these following tips to reduce the student loan burden that you – and your kid –will face later in life.

Tip #1: Save for college as early as possible

You already know how expensive college is right now. But what about the future? Well: the annual price tag for a public school is estimated to swell to more than $35,000 in the year 2017, and an incredible $86,000 for an Ivy League school. Unfortunately, 31% of parents who plan to help pay for college haven’t started saving yet. Start socking away as much as you can now to decrease the need for loans in the future.

Tip #2: Open a 529 Plan

A 529 college savings plan is the best thing going when it comes to saving for your child’s college education. Available in every state in the country, a 529 plan is portable and can be used at any qualifying institution of higher learning in America. It’s a great way to sock away tens of thousands of dollars annually for higher educational expenses because money in a 529 plan grows tax-free if it’s used for college costs.

Many states even give you a tax-deduction for contributing to a 529.

Best of all: these plans are maintained in your (or the donor’s) name, so they don’t reduce your child’s chances for receiving financial aid. For more info on 529 plans, visit http://www.savingforcollege.com.

Tip #3: Plan for some aid

Unless you can truly afford it without changing your whole lifestyle, strike a balance between trying to fund your kids’’ college account, and planning to get some need based aid. There’s no rule that says you have to foot your son or daughter’s entire college tuition bills, plus pay for all his or her living expenses and other needs.

Apply for aid, but don’t over-estimate how much your child will get. Although 72% of parents think their kids could get merit aid, the reality is that only 28% of students currently do. Your child’s financial aid package will be based on your income and assets, the cost of the school, and whether you have other children in college.

Take your entire situation into account when you’re thinking about aid. Do you have more kids or other family members who will need money for school or other reasons? Also be mindful of your own income picture – not to mention rising healthcare costs, current bills, and the need to save for your own retirement.

Tip #4: Impose a Cap On Spending For College

It’s very easy to lose track of money spent on college. You can write a check here or there for living expenses, allow your child to take money out of your account, pay his or her credit card, and send in tuition payments to school –– and before you know it you have spent many thousands of dollars. Sit down and talk with your son or daughter and set a budget. Explain what is financially feasible and possible for you to do – and what is not.

If all you can afford to give (or take out in loans) is, say $5,000 or $10,000 a year, then put that number on the table as your limit, then stick to it. For some advice on how much debt you can realistically manage, go to a financial planner who specializes in college financing.

You can get a referral from the National Institute of Certified College Planners. Alternatively, any number of college financing calculators that are available online, such as the one at FinAid.

Tip #5: Don’t skip your retirement savings

Experts from the National Institute of Certified College Planners agree with me that you shouldn’t sacrifice your retirement to pay for or borrow money for your child’s education. Think about it this way: Little Johnny might be able to borrow for college, but who’s going to loan you money for your retirement?

Tip #6: Allow your child to borrow first

This is a more cost effective way to take on college debt since federal Stafford Loans stand at a maximum interest rate of 6.8% for students, but PLUS loans (Parent Loans for University Students), which are made to parents carry an 7.9% interest rate.

Tip #7: Use online college saver programs like Upromise.com

When you enroll in a program like Upromise, a small portion of the money you spend on everyday things – like gas for your car, clothes purchases or entertainment – gets funneled into a savings account for your child. Heck, if you were going to spend the money anyway, you might as well get a little rebate for that spending, which can help pay down college expenses.

All parents understandably want a better life for their children, both in terms of their personal happiness and their financial security. Following the steps I’ve outlined above will go a long way toward helping you and your kids achieve financial stability.

“Ask The Money Coach” is a syndicated column written by personal finance expert Lynnette Khalfani-Cox, co-founder of the free financial advice blog, AskTheMoneyCoach.com. Follow Lynnette on Twitter at @themoneycoach.

In light of this looming crisis of highly-educated but delinquent debtors, TheLoop21has identified three of the biggest problems with the student loan system and offers solutions to them.

For more on the student loan debt and how to fix it, visit BlackEnterprise.com/BENext

How much will that cap and gown cost you? (Image: Thinkstock)

Taking out a student loan may be the only way to make college affordable. But it’s a good idea to learn about the different types of student loans available and what your repayment options will be after you graduate.

Making some informed decisions about your finances before the school year begins can help put you on the fast track to financial success after graduation.

If you haven’t been able to secure college grants or scholarships, and don’t have the means to pay for higher education yourself, student loans may just be your only alternative for covering the high cost of college.

Use this brief guide to help you choose the right student loan that meets your needs:

Continue reading on next page for types of student loans

(Image: Thinkstock)

TYPES OF STUDENT LOANS

There are several different types of student loans to choose from, and some have better repayment options than others. Your choices include:

• Federal Family Education Loan Program (FFEL) – provided by private lenders, including banks and credit unions, and are guaranteed by the Federal Government.

• Federal Direct Student Loan Program (FDSL) – funded directly by the U.S. government.

• Stafford Loans – subsidized or unsubsidized loans with low interest rates. If you’re not eligible for a loan from a private lender and can demonstrate financial need, this is the loan for you. (Note: with a subsidized loan, the government pays the interest on the loan while a student is in school).

• PLUS Loans – low-interest loans that parents can apply for on behalf of dependent undergraduate students.

• Perkins Loans – a type of federal loan that is designed to assist students who have an extreme financial need. These are subsidized loans and have very low interest rates.

• Consolidation Loans – these will combine existing loans into one loan so that you can lower your monthly payment and if you choose to, have your payback period extended.

• Private or alternative loans – student loans issued by private banks and lenders. These can help to cover college expenses that are beyond the government loan limit.

A word to the wise: You should always seek federal loans before trying to get a private loan.

Federal loans have better loan forgiveness options, and better alternatives if you run into financial trouble and need to get a loan forbearance or deferral. Additionally, federal loans charge lower interest rates and fees, and provide greater flexibility in repayment options.

Continue reading on next page for loan interest rates

(Image: Thinkstock)

STUDENT LOAN INTEREST RATES

Student loan interest rates and repayment options vary by type of loan and the date of disbursement. Here’s a breakdown of your repayment options for all loans disbursed between July 1, 2011 and June 30, 2012:

• FFEL Subsidized Loans: Fixed rate of 3.4% for undergraduates, fixed rate of 6.8% for graduate students

• FDSL Loans: Fixed rate of 3.4% for undergraduates, fixed rate of 6.8% for graduate students

• Stafford Loans: 4.5% for undergraduate students, 6.8% for graduate and professional students

• PLUS Loans: Fixed rate of 7.9% for parents, graduate students and professionals

• FFEL PLUS Loans: 8.5% for all students

• Consolidated Loans: The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.

• Private Loans: Interest rates vary by lender; but rates in the 8% to 12% range are common, according to FinAid.org, a college financial aid site.

Continue reading on next page for loan repayment options

(Image: Thinkstock)

LOAN REPAYMENT OPTIONS

You typically have four repayment-plan options for federal student loans. Private loans have their own guidelines for repayment, and repayment plans can vary by lender.

The four main repayment plans for federal educational loans are as follows:

• Standard Repayment – you agree to pay a fixed amount for the loan up to 10 years, depending on the amount of the loan. The minimum payment requirement is $50 per month.

• Extended Repayment – the loan term is extended to 12 to 30 years to reduce the monthly payment. This gives you more monthly cash flow, but you wind up paying more in interest charges over the life of the loan.

• Graduated Repayment – this repayment schedule begins with lower payments so that you can afford payments as you start your career, and then increases gradually every two years. The loan term can range from 12 to 30 years, and the monthly payment must be at least $25.

• Income-Contingent Repayment – your payments are contingent on your income level and will be adjusted annually as your income or family size changes. The maximum repayment period is 25 years. After 25 years, any remaining student loan balance is discharged, or forgiven.

No matter what student loans you decide to take out in order to pay for college, it’s important to realize that repaying college debt is serious business.

If you default on a student loan, you risk damage to your credit rating, being barred from getting future educational loans, and potential wage garnishment.

Read these tips for more advice on how to fix a defaulted student loan and check out these calculators from FinAid.org to find out how much a college loan will cost you.

Lynnette Khalfani-Cox is a weekly money and finance columnist for BlackEnterprise.com and founder of the free financial advice blog, AskTheMoneyCoach.com. Follow her on Twitter @themoneycoach and see her column every Tuesday on BlackEnterprise.com.

While it’s true that Chapter 7 bankruptcy can wipe out many consumer debts, such as credit card payments and medical bills, it’s also the case that a lot of different types of debts don’t get eliminated in bankruptcy court.

Additionally, Chapter 13 bankruptcy—which consumer advocates say many African-Americans have been steered into recently—isn’t designed to allow you to completely walk away from your debts, but rather to reorganize your finances and pay off debt over a period of three to five years.

So before you take the step of filing for bankruptcy protection as a cure-all, it’s important to be aware of the various financial obligations you will still have to handle even after you go through the process of bankruptcy.

Student Loans

Generally speaking, you can’t say goodbye to those huge student loan balances when you declare bankruptcy. However, the bankruptcy court may make an exception if you can prove that repaying your student loans would pose an “undue hardship” for you.

In this situation, you have to prove that you cannot maintain a minimum standard of living and repay your loans, and that your financial situation is not expected to improve any time soon. Being unemployed isn’t proof enough. You must convince a court that you are practically unemployable and may not ever get a job.

So it is extraordinarily difficult to prove undue hardship. That’s why even though there were 1.5 million personal bankruptcy filings in the U.S. in 2010, virtually none of those bankruptcy petitioners received an undue hardship ruling from a court allowing them to discharge their student loan debt.

Child Support and Alimony

Bankruptcy courts will not discharge any child support payments or alimony you owe. If you owe back child support, you are still responsible for paying that debt. Any debts incurred from “the nature of support”, which are debts that are the result from a child’s care and medical expenses, are also not discharged by the bankruptcy courts.

Federal, State and Local Taxes

If you have outstanding tax debts to federal, state and local governments, you will be responsible for paying these off entirely. This includes any payments you charged on a credit card. However, there are some exceptions.

If you have income tax debt that appeared on a tax return that you filed at least three years ago; on a tax return that was filed at least two years ago; the tax assessment is at least 240 days old; the tax return was not fraudulent; and you are not guilty of tax evasion, you may be able to have your tax debts discharged under Chapter 7 and Chapter 13. Keep in mind that Chapter 13 bankruptcy means you will need to set up a payment plan to repay some of your debt.

Miscellaneous Debts

Other types of debts that are not discharged by filing bankruptcy include:

• Fines or restitution charges imposed after a criminal proceeding
• Any court fees associated with filing a case, motion, complaint or an appeal
• Debts from intoxicated driving
• Debts that you tried to have discharged from a previous bankruptcy filing, but were dismissed because of fraud or misfeasance

Clearly, filing for bankruptcy isn’t necessarily the solution for making all of your debt disappear. So if you were hoping that bankruptcy would free you from any of the debts mentioned above, that was wishful thinking. Instead, you should consider other financial alternatives, such as negotiating a lump sum settlement or coming up with an installment plan acceptable to your creditors.

Since a bankruptcy filing will stay on your credit reports for up to 10 years, bankruptcy should only be used as a last-ditch strategy. But you should know that bankruptcy doesn’t have the stigma it once had. You can definitely rebuild your credit, finances and emotions after bankruptcy—and it won’t take a decade to do it.

Also, if you truly need bankruptcy protection, don’t let anyone make you feel guilty about using this financial safety net. Bankruptcy is a legal process that exists for a reason. The simple fact is that people run into unexpected and unmanageable financial challenges due to a host of reasons—ranging from job loss to divorce.

If you are unsure of whether you can or should file for bankruptcy, read my advice on when to file for bankruptcy protection (and when not to). Should you choose to file bankruptcy, it’s also usually in your best interest to find a good bankruptcy attorney to work with so that an experienced professional is guiding you through the process.

Lynnette Khalfani-Cox is a weekly money and finance columnist for BlackEnterprise.com and founder of the free financial advice blog, AskTheMoneyCoach.com. Follow her on Twitter @themoneycoach and see her column every Tuesday on BlackEnterprise.com.

Of course, that’s a lot easier said than done, with unemployment rate around 9% and even higher–a staggering 16%–for African-Americans.

Still, there are many steps recent college graduates can take to put themselves on the road to financial security, including numerous steps that have nothing to do with finding that next work gig. In fact, if you don’t yet have a job, the tips below can help you keep your finances in tip-top shape while you actively pursue employment.

Here are four financial strategies for the Class of 2011:

Avoid Credit Card Pitfalls

Once you leave campus life, it’s important to learn how to juggle a host of new expenses–rent, food, utilities, and more. If you haven’t already landed a job, you might be tempted to rely on credit cards to make end meet. But for your own sake, resist that temptation.

Keep a tighter rein on your budget by using a debit card instead, suggests Jesse Ryan, managing director, Accounting Principals. “If you must use a credit card, shop around for a card with a low interest rate, preferably below the 12% range, and try to pay off the card’s balance in full each month,” Ryan adds.

Check out CardRatings.com as a good place to find the best credit card that fits your situation.

Don’t Ignore Your Student Loans

If you borrowed money to pay for college, you probably had an “exit interview” in which the financial aid staff at your school reminded you that those student loans were just that – loans – and not free money. Still, much of what’s explained in those exit interviews seems to go in one ear and out the other for many students.

But the fact remains, you can’t afford to let your student loans go delinquent–or even worse, fall into default status.

So if you have any trouble whatsoever paying your student loans, or anticipate that you might, reach out immediately to your lender or loan provider. Particularly if you’re not yet employed, find out what options exist, such as getting a loan forbearance or deferment of payments. Even if you’ve defaulted on your student loan, there are steps you can take to get back on track.

Check Your Credit Reports and Credit Scores

When you were in school, the three digits that mattered most were your GPA. Now that you’ve left college, it’s all about your FICO score, a three-digit number that ranges from 300 points to 850 points. Maintaining a good credit rating is important because it’ll help you do everything from renting an apartment to getting cheaper auto insurance rates. Also, having bad credit could hurt your chances of getting a job since the Society for Human Resource Management reports that 60% of all U.S. employers do some form of credit checks when screening job applicants.

Visit AnnualCreditReport.com to get your credit reports free of charge from each of the “Big Three” credit reporting agencies, Equifax, Experian and TransUnion. By law, you’re entitled to get one free report from each credit bureau every 12 months.

You have to buy your credit scores. Get your FICO score for $19.95 at MyFICO.com. Since the VantageScore is growing in popularity, it’s a good idea to check out your VantageScore too. It’s available for $7.95 here from Experian.

Use Graduation Gift Money to Start an Emergency Fund

Many college grads rake in some serious dough from relatives and others who want to help the graduate in the family start off on the right foot after graduation. If you’re lucky enough to collect some big money–or any money at all–as a graduation gift, do the right thing with those funds. Instead of just blowing the money on clothes, electronics or other things that will depreciate over time, stash that money away in an emergency fund so you’ll have a cash cushion for when times get lean.

“This should be used only for times of unemployment, medical emergencies, or a
sudden uninsured car or home repair,” says Bill Hardekopf, CEO of LowCards.com. “The goal should be (to save up) enough for six months of living expenses.”

By using these four strategies, college grads from the class of 2011–including those of you with jobs and those of you still looking for work–will be better prepared to financially transition from campus life to life in the real world.

Lynnette Khalfani-Cox is a weekly money and finance columnist for BlackEnterprise.com and founder of the free financial advice blog, AskTheMoneyCoach.com. Follow her on Twitter @themoneycoach and see her column every week on BlackEnterprise.com.

Preparation is key when it comes to financing your education (Image: Thinkstock)

As many college graduates begin thinking about their dreaded monthly student loan payments, the soon-to-be-freshman are tying up loose ends on their financial aid packages, including a large portion of student loans. In fact, Americans have accrued more student loan debt than credit card debt—over $900 billion. The total amount is set to hit $1 trillion this year.

BlackEnterprise.com spoke with Curtis Johnson, president and chief operating officer of Student Funding Group, on why college-bound students should create a budget, how students can lower debt while in school, and the reason parents should let college students front the bill (just a bit).

• PLAN AHEAD
  

The earlier both parents and students prepare, the better. Be sure to adhere to the school’s recommended deadline for filing financial aid or face the prospect of not receiving aid at all.

Parents: Start saving early. It doesn’t have to be a large amount, but anything counts. If your savings can’t go towards tuition costs, at least it can assist with the smaller payments, such as room and board, books or additional fees.

Students: Prepare to work. Even if you don’t qualify for work-study, seek a temporary or part-time job to assist with other expenses. Working before you reach campus can give you a jump start on personal savings.

• CREATE A BUDGET

Every university and college lists the estimated cost of attendance on their website and the figures are updated yearly (if it’s unavailable, it can be mailed or emailed to you upon request). Start thinking about what the family can contribute realistically towards this education. Factor in savings, outside scholarships and all finances separate from your financial aid award. Once a student’s financial aid package arrives—breaking down how much was awarded in scholarships (i.e. merit-based, athletic or departmental), grants and federal loans—the family can determine how much is needed in additional assistance from an alternative (or private) loan.

• MAKE PAYMENTS WHILE IN SCHOOL

It sounds like it would work in a student’s favor to wait until after graduation to start paying down the principal or the loan’s interest, but not so.

“[Students] can at least make the interest payments,” says Johnson. “There’s no penalty for paying these loans early. If they can afford to make the interest payments, we advise students and parents to do that, which is another good way of keeping the cost down on their student loan.”

• PARENTS, TAKE A BACK SEAT WHEN IT COMES TO APPLYING FOR LOANS

Let students get the loan in their name, allowing them to borrow the maximum amount possible through the financial aid award, Johnson advises. Federal loans have a lower interest rate than the PLUS loan, making this a more viable option. If parents want to assist after the student takes the loan out in his or her name, they can do so outside of taking the loan out in their name. Assisting with the interest rate is a better option.

• NO ONE LOAN IS THE SAME, SO KNOW THE DIFFERENCE
  Here’s a breakdown of each type of loan: 
  • Federal Perkins Loans (need-based) – Awarded by colleges to students with the highest need. The interest rate is relatively low at 5% and you don’t make any loan payments while enrolled in school. Undergraduates can borrow up to $4,000 a year, totaling not more than $27,500 overall.
  • Federal subsidized Stafford Loans (need-based) – The fixed interest rate is 3.4% for the 2011-2012 academic year. The government pays the yearly interest while you’re in school. Undergraduates can borrow up to $3,500 for their freshman year, but the limit rises as a student progresses through school.
  • Federal unsubsidized Stafford Loans (not need based) – The interest rate is set at 6.8%. As a dependent undergraduate, you can borrow up to $5,500 minus the amount of your subsidized Stafford, if you have one. That applies for a student’s freshman year; the limit rises as he or she progresses through school. If you’re an independent student or if one’s parents can’t borrow a PLUS Loan, the limit increases by $4,000. You’re responsible for paying interest on the loan while in school, but can capitalize the interest by adding it to the principal.
  • Federal parent PLUS Loans (not need based) – The interest rate is fixed at 7.9%. Parents can borrow up to the total cost of education, minus any aid received.
  • Private (alternative) loans (not based on need) — Rules and stipulations vary depending on the lender

Time to stop throwing away your money. Here, we’ll outline some terrible financial advice you should avoid at all costs.

1. Stay away from credit cards. Lenders want to see that you have some experience with credit. If they have nothing to go on, chances are, you won’t get a loan. Consumers with thin credit files (those who have little or no credit history) are more likely to get rejected. When used wisely, and provided that you have steady income to pay the bill at the end of the month, credit cards can help build credit history.
2. Pay off your bills first, then build your emergency fund. The financial crisis showed us that emergency savings is vital. What good is a zero credit card balance if you can’t feed your family? Your primary focus should be on saving at least six months of emergency cash.
3. Budgets are optional. Budgets are essential to making sure that you don’t overspend. Everyone needs a budget, regardless of income. If you prefer to call it a “spending plan,” because that makes you feel better, then so be it. Just get one.
4. Take out as many student loans as you need. You can pay it off after you get a “real” job. If you can avoid being saddled with overwhelming student loan debt, by all means, do it. Explore all of your options. Instead of blindly taking out loans, look for scholarships, grants, and other forms of aid. Don’t take on unnecessary debt that will eat into your future income.
5. If you’ve been reported to ChexSystems, you can’t open a checking account anywhere for five years. This is wrong. You might still be able to open what’s called a second chance checking account (also known as a fresh start checking account). Check with your local bank for details.

In April 2009, the brothers started SponsorChange.org (www.sponsorchange.org), a Pittsburgh-based philanthropic organization that helps college graduates earn payments toward their student loan debt in exchange for volunteer service. Raymar, 28, is a full-time graduate student pursuing a master’s in public policy and management at Carnegie Mellon University Heinz College. Robert, 32, is an assistant professor of operations research and public policy at Carnegie Mellon.

“Many college grads have to take a second or third job in order to make ends meet,” says Raymar, whose own $25,000 in undergraduate student loan debt is in deferment because of his status as  a full-time student. “Our program gives them the opportunity to do something more meaningful, utilize their skills, and give back to their community.”

The issue of student loan debt and record rates of defaults has been at the forefront of public debate for many years. In September, Education Secretary Arne Duncan announced that the student loan default rate for fiscal year 2008, the latest data available, has reached 7%, up from 6.7% in fiscal year 2007. And according to the Project on Student Debt, the average undergraduate debt for 2009 is $24,000. For the Hampshires, the statistics add urgency to the need to assist debt-weary college graduates with options to help them repay student loans.

Under the ambitious program, college graduates are matched with nonprofit agencies to do skills-based service projects. Here’s how it works: SponsorChange.org assesses the needs of various nonprofits to define projects that have a narrow scope and a finite end date. Once the specific need is determined, SponsorChange.org recruits and screens college graduates who have student loan debt, and sends the nonprofits, corporate sponsors, and private donors a list of possible volunteers. The nonprofits make the final selection. Participants in the program have an average debt load of $25,000 and an average monthly payment of $200. After a student completes a service project, the funds they earn are automatically transferred to the student’s outstanding loan account. Funds can be paid through nonprofit grants, corporate sponsors, or private donations. Service projects include business and leadership training, homelessness awareness programs, healthcare services, and job training exercises.

Sheena Hancock, a graduate of the University of Pittsburgh, completed a four-month SponsorChange project at a Wilkinsburg, Pennsylvania, Boys and Girls Club last year, as a leadership development counselor. After Hancock completed the project, the holder of her student loan received $600 from SponsorChange.org and $400 from the Boys and Girls Clubs of America.

So far, 19 students have participated in SponsorChange’s program, with the total amount paid toward student loan debt at about $9,500. Students volunteer about 50 hours of their time over a four-month period, and Raymar estimates that SponsorChange has saved participating nonprofits nearly $47,000, a figure he’s calculated based on market rates for the types of services the volunteers provide.

“SponsorChange.org is a platform for micro sponsorships,” says Robert. “It allows people to make donations and have a personal connection to a college graduate.”

So far the nonprofit has partnered with HmCapital, Mt. Ararat Baptist Church in Pittsburgh, the Sprout Fund, Pittsburgh Cares, and about a dozen or so private donors.

“Our program is transparent,” says Shawn Agyeman, director of marketing at SponsorChange.org. “The funds the participants earn are earmarked for student loan debt and nothing else.” Sponsors can track how nonprofits spend their donations by tracking the status of the project on the organization’s website. After they complete their service projects, students blog and post videos and photos to the site. “By tapping into the underutilized resource of volunteer support for nonprofits,” says Raymar, “we’re making it possible for everyone to have access to the funds they need to help pay back student debt.”

How They Did It

• Do extensive research and know your cause and consumer. “Student loan debt has been an ongoing issue for years,” Raymar says. “Focusing on a specific problem and exploring creative and new ways to address it make marketing and implementing the concept easier.”

• Start out small and expand. Robert says a small pilot project with a few volunteers is the best way to initiate a project. “Proof of concept is the key to knowing if you’re on the right track and if your idea is feasible,” he says.

•  Don’t be afraid to form partnerships. The most effective way to present your idea to the community at-large is to develop alliances with community agencies and grassroots organizations. “Find synergy with partners and leverage those synergies,” Raymar advises. “You won’t be able to build your venture alone—you will need partners, especially initially.”