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by AlchemistCamp
1195 days ago
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> Well... aren't these mainly venture capital based startups? It's not actually the money of the startups but rather the money of the VC funds. No. They literally sold pieces of their businesses for that money. The equivalent for students would be if instead of borrowing the money, they signed over a percentage of all future earnings for the rest of their lives. |
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There's no effective difference. Only the terms are different. Although if your student loan debt is large enough, you may in fact be signing over a percentage of all future earnings for the rest of your life. One of the biggest growing groups of student loan debtors is senior citizens.
Both a loan and VC funding are legal relationships between someone who lacks money and someone who has money. It's a trade of current money for future money. Of course it's always a risk, because the future money may never show up: the debtor defaults, or the startup goes out of business. Plenty of startups die for reasons that have nothing to do with bank failure.
(Note also that a loan holder cannot simply repossess the money if the loan is in default. The disbursed money is no longer theirs. At worst, the loan holder can sue to have the debtor's wages garnished by a certain %, maximum 15% for federal student loans.)