Microfinancing College Tuition

Jonah Keegan talks about an online registry that simplifies giving and receiving 529 contributions for college.

A lot of pixels have been spilled trying to explain what “web 2.0″ means. I’m neither wise nor foolish enough to propose my own answer, but one of my favorites is that it means we’re still only in the second inning of the internet. I think I like that answer because it means we ain’t seen nothing yet.

The improved personalization, more efficient communication, and more data-rich environments (more data equals more better) provided by the current state of the art in internet technology is giving entrepreneurs better tools to solve new problems and in turn open up new markets.

My own company, Freshman Fund, is using these tools to try and solve a specific problem that bedevils millions of American families, saving enough to make college affordable for our children. Our thesis is that social software — leveraging those key web 2.0 advancements in personalization, communication and data-utilization — will open up a new market for college savings by making it easier than ever before for friends and family to help individual students save for college.

Making asset allocation easier, providing the tools to let capital flow places where it previously faced high-to-insurmountable barriers, has generally provided a positive net return for everyone involved. As an analogy, the “social networks” of tribes, villages and communities in Africa, India, SE Asia and other locales have been practicing microfinance on a very local scale for centuries. But when Muhammad Yunus started the Grameen Bank, he turned that local, peer-to-peer practice into something scalable and launched a market for microcredit that has grown to over $25 billion worldwide.

We see Freshman Fund as a scalable solution to the college savings problem, with the potential to “do well by doing good” in helping to make college more affordable for millions of U.S. families. Sure it’s a tall order, but it’s also a worthy goal. With Americans spending over $450 billion per year on gifts, shifting just 3.4% per year into college savings would provide the class of 2030 with a college education that was 100% debt free.

So how does this speak to inning three for the internet? Well my own experience is certainly anecdotal, but anecdotal evidence does seem to be accumulating for the rise of social software that solves problems by engaging more directly with aspects of the user’s offline lives. As a service provider directly in that line of work, I’ve got my fingers crossed for a slugfest third inning, with multiple home runs, and maybe even a grand slam or two.