The majority of the top-ten ranked business schools are hiking tuition fees by an average of 4% for the class of 2016, on top of a 37% rise over the past six years, according to Bloomberg data, and more students are being forced to rely on their families for funding.
As banks have cut back on lending in the aftermath of the crisis, crowdfunding platforms have cropped up to satisfy demand. US-based online platforms such as Indiegogo and Piglt, and the UK’s Hubbub, are helping business school applicants raise cash for tuition, fees and other expenses.
“We have a whole smattering of postgraduate degrees funded or attempted funded on the platform,” says Piglt CEO Casey Wallace.
The crowdfunding company describes itself as “education’s entrepreneurial piggybank”.
Casey says that MBAs use the site to raise money. “It’s more towards the master’s degrees – somebody who has already started a career,” he says. MBA and business school students have an advantage, he adds, because Piglt requires you to market yourself to strangers. “You’re taught that mentality and way to think in business school. They are perfect.”
Casey launched the platform in 2012 after studying an MBA at Loyola Marymount University in California. Piglt raised $50,000 in 2013 from an angel investor.
Piglt charges a 5% fee if the goal amount of funding is reached and 8% if the goal amount is not. The platform has drawn 2,000 funding campaigns since its launch.
This growth reflects the expanding market of crowdfunding, which has reported a 60% year-on-year increase in the number of registered platforms.
According to the Peer-to-Peer Finance Association, crowdfunding sites have lent out more than £500 million in the first half of 2014, and the industry is on track to lend £1 billion in the UK by the end of the year.
“It’s about opportunity,” says Duncan Knox, managing director and co-founder of Hubbub. The crowdfunding platform has increased its user numbers five-fold over the past year.
The education-focused fundraiser charges no fees, but PayPal applies fees of about 3.5% to successful projects.
Duncan says Hubbub has been “flooded” with projects after high-profile campaigns that have been run on its platform. It was used by Emily-Rose Eastop, whose £25,000 campaign for her MSc at Oxford University attracted the attention of the Daily Mail newspaper, which labelled her a “posh brat”.
This month Hubbub raised £400,000 in an equity crowdfunding campaign on Crowdcube, the peer-to-peer lender, vastly exceeding its £250,000 target.
Duncan says that campaigns tend to be for postgraduate degrees.
“My ambition is to become an investment banker or work for a multinational corporation,” says Yusupha Chorr who is using Hubbub to raise £11,950 to study an MSc in Investment Management at Birkbeck, University of London.
He already has an undergraduate degree in banking with economics and law, but he dreams of becoming an investment banker.
“The university is well known for its intimate cooperation with corporations within the business and finance industry,” says Yusupha. “If I manage to hit my full target, all the funds raised will go towards paying my full tuition fees,” he adds.
Hubbub has expanded to offer universities branded platforms on its site, which help them grow their own fundraising communities. It has 12 UK universities signed up – including Middlesex University Business School – and Duncan says the business is growing rapidly.
These platforms also encourage more alumni to give back to their business schools.
In April, Hubbub teamed up with Crowdcube to expand internationally. They estimate that only 1% of university alumni fundraising in the UK is done online – but $25 billion is given to universities by alumni annually in the US.
Duncan says that the University of York increased its donor numbers by 15% within a week of being on the Hubbub platform. “They see it as a god way to engage alumni,” he says. “They give someone an opportunity, but get back a reward as well.”
Unlike traditional crowdfunding platforms, which raise money for start-up businesses in return giving investors equity in a company, educational fundraisers rely on philanthropy, says Duncan.
“People that have had that opportunity [to study], they feel like giving back,” he says. “They [students] are leveraging their own networks, making it easy to raise funds, but at same time they are letting donors be part of their journey.”
Ashley Arnold, director of MBA recruitment at the UK’s Henley Business School, says: “We’ve seen an ascendency on these crowdfunding sources, where you’ve got MBA alumni promoting this for the greater good. People are donating.”
Casey says that Piglt investors are incentivized with credits which they can use in stores – but the spirit of the platform is to support students.
He adds that companies often invest in students’ education because they may need a service which the student can provide. “If an attorney was creating a campaign, an MBA student like myself could offer some marketing consulting, or things I know I qualify to do,” he says.
He launched the platform because the majority of people have degrees in professional careers that they do not do for a living, he says. “People get a history degree and do something completely different. This is a great outlet for people to get themselves a foot in the door, to go into a different career.”
But he warns that it will not be an easy ride. He says: “People have the misnomer that if you just create a campaign people are going to give you money for no reason, without making any effort. [But] that’s a huge part of crowdfunding – to give the perception that your project has legs and traction.”
Duncan says that education is the hardest type of campaign to fund. “You need to go beyond your immediate network, and that’s hard to do when people can’t see the social benefit,” he says. “Some people expand it to land on their feet, but it’s down to personal promotion. Its hard work.”