Paving the Way for Higher Education

The higher education sector is nearing a crisis point – tuition costs are rising higher and higher, making affordability more difficult for American families.  Students are carrying more student debt than they ever have in history, hampering their matriculation into life after school.  If those conditions were not worse enough, universities still feel pressure to reinvest in plant and equipment to keep pace with competitors, raising institutional debt service and capital costs over time. 

These pressures have created a new space for entrepreneurs to be successful in provided they can find ways to better manage costs and improve the financial solvency of tuition-based, built-out campuses.

A new company, Pave, has come up with a new idea for helping students finance their educations without incurring such large personal debt.  Pave arranges for private investors to take an equity stake in individual college students in exchange for future payments from the student’s salary.  Pave’s website pledges that “backed” students are put on 10-year, affordable payback plans so that this investment structure pays off for both parties.

Last week, we reviewed a matrix that distinguished start-ups between conventional and innovation applications of their products and business system.  In this case, Pave is offering a conventional business system in that investors have been able to purchase equity stakes in investment vehicles for a long time. 

However, the innovation is in the product.  College students have never been considered investment vehicles that could carry equity stakes, nor have students had a method for pledging future wages to private investors (that were not banks, at least).  So far, eight students have entered into Pave’s system and received backing from private investors.

As someone exploring new methods for student finance myself, I can appreciate Pave’s efforts to give students options beyond traditional debt.  It strikes me as ironic that more private companies have not sought to enter the student debt space with new products.  In this case, Pave may have create a new product within an existing business system that gives college students chances they otherwise may not have.

Are their other industries nearing a major turning point that could benefit from a new product or business system?

Source:

http://pave.com/