Proposal: pool your student loans to build a frat house

Undergraduate students in the U.S. can borrow about $10,000 per year, currently with 2.75% annual interest. What if they pooled that money to save on housing?

To illustrate, imagine a sorority wants to buy a house with space for 50 sisters. $10,000 from each student’s federal loan eligibility (repaid when they move out) would raise $500,000. If each student could muster $40,000, they could pay for the whole house with the $2 million raised. Each new generation of students would contribute capital to keep the scheme afloat.

What I’m describing is inspired by the Korean system of Jeonse — a proven way to raise capital for real estate investment.

The up-front cost seems expensive for students, but it would all be repaid after leaving the housing (with proper insurance). How much would interest cost? Assuming 4% average interest rates over four years of college, a student who borrowed $40,000 as a freshman and repaid it after senior year would pay total interest charges of $6,800, or $142 per month.

Obviously, food and maintenance would raise the monthly living cost beyond $142, but it’s not too shabby. Four years in Tarkington Hall costs $302 per month plus food. It’s also worth noting that the $142 per month could be paid after graduating since student loan payments are typically deferred while one is still enrolled in school.

So think about it! Now that income-sharing agreements are a thing, maybe your extra student loan eligibility can help you save on housing.

— Wyatt Clarke, 2009 graduate from the Krannert School of Management

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