Visitors to zomia.org register as lenders and fund student loans using a credit card or PayPal account. Over the course of a student’s education, lenders and borrowers can interact virtually through updates and messages to each other. After graduation, a borrower’s financial situation is assessed; if appropriate, Zomia begins collecting income-based repayments, which are then distributed to lenders proportionally via their lending accounts. Lenders can then withdraw their funds or re-use them to support other students.
We take pride in the rigor of our underwriting processes. Based upon information provided in the online Zomia application, we evaluate applicants across 19 criteria before conducting formal interviews and making final decisions about their suitability for a loan. We place heavy emphasis on references and the willingness of others to vouch for a student’s potential, sense of responsibility, work ethic, and need.
It depends. If a loan is marked “pre-funded,” the student has already received funding from Zomia and lender funding is replacing Zomia funding. This allows Zomia to identify and support other students for future funding. Backfilling is critical to the Zomia model, giving students confidence they will be funded for a full term even before funding is secured on the website.
Loans marked “partially pre-funded” have not been pre-funded or disbursed in full. Zomia must secure additional lender contributions to meet the total funding need. In either case, loan funding provided by lenders can only be used to support student loans, and lenders are linked to the students they support for loan repayment. Lenders can search for pre-funded and partially pre-funded loans from Zomia’s student roster.
Yes. Although Zomia does not charge traditional interest on its loans, the “maximum amount paid” increases by 5% of principal during each year of repayment for up to 12 years. Repayments are made as a percentage of a graduate’s income until a repayment “cap” is reached or the contract term ends. Repayments are capped to ensure that no student is unfairly gouged; excess payments never exceed the equivalent of 5% flat annual interest. If a contract lasts more than 12 years, this equivalent flat interest rate falls below 5%.
Note: Zomia’s original loan model, in effect for our first 77 students, included a shorter overpayment period with a maximum equivalent flat interest rate of 3.5%. Our model was changed in 2018 to support improved sustainability.
No. Although lenders receive repayment up to the amount they lend, without adjustment for inflation, the act of lending to a Zomia student is philanthropic in nature.
Forfeiting profit enables students to borrow with peace of mind at an affordable rate. Neither Zomia nor its lenders profit from a student’s financial need.
Your “extra cash” could be sitting in an account somewhere earning investment returns. Yet chances are you’re reading these words because you, like millions of others around the world, care about more than your own net worth.
By supporting a Zomia student’s education, you are investing in that individual’s future. Where traditional investments yield financial returns to you, funding a Zomia loan yields increased opportunity and potential financial rewards to the student you support. You’re altering that individual’s opportunities and life trajectory.
Like a traditional investment, there is risk involved—and unlike traditional investments, you cannot earn a financial return. But because you stand to recoup the money you lend, your support of a student is not a donation.
No. Although the act of funding a Zomia loan is philanthropic in nature, it is not tax-deductible because lenders receive repayments after a student finishes school. While full repayment is not guaranteed, Zomia employs a rigorous underwriting process and repayment pooling (among other mechanisms) to reduce the risk of loss to individual lenders.
Zomia strives to ensure that every lender is repaid in full, but full repayment is not guaranteed. Mechanisms such as repayment pooling and incentives during repayment are used to encourage repayment and reduce risk, but Zomia’s loans are unsecured. (No homes or land can be seized in the event of loan default.)
Repayment typically takes at least two years, with larger loans taking a decade or longer. Loans are listed with a target repayment start date and contract duration. Contracts range from ten to twenty years depending upon the amount borrowed and may be extended via deferments. If the contract period elapses before a loan is repaid and all contract requirements have been met, the remaining debt is forgiven.
Whenever your student makes a repayment, you receive a repayment. Depending on their individual earning characteristics, students make repayments monthly or quarterly. This means you can expect to receive repayments either once a month or four times per year.
Some of the repayment will come from the student you supported, and the rest will come from other students who are also in repayment. This is a method we refer to as “pooling.”
In its most basic form, pooling means we proportionally allocate all student repayments to the lenders who supported them. This means that each repayment you receive is actually coming from a combination of the students you supported and other Zomia students who are repaying their loans. The frequency with which you receive repayments, however, remains linked to your students’ repayment schedules. If, for example, a student defers repayments for a period of time to return to graduate school, that student’s repayments are postponed, which means you would not receive repayments until the student started making repayments again.
It’s up to you! The minimum amount you can provide to a single student is US$25. The maximum is $1,000. Our only advice is that you should never lend more than you can afford to lose. Although we do everything we can to ensure students repay the lenders who support their degrees, we cannot guarantee repayment. Student loans are risky, and the type of loan that lenders provide students are unsecured.
To date, Zomia has been sustained by team members, family, and friends. Prior to launching, we decided to focus on fulfilling our social purpose before building any revenue-generating services. As we gain momentum on the peer-to-peer aspect of our model, we will shift attention to revenue generation.
The MAP, which stands for “Maximum Amount Paid,” is the maximum amount students can repay in a given year of their contract. This is laid out clearly in the MAP schedule, which is included in every loan agreement.
Beginning in the first year after graduation, the required total repayment increases each year by 5% of the original loan amount, up to a maximum of 60% in year #12 (assuming a contract extends beyond the 10-year base, which is determined by the amount borrowed). Once a student’s total repayments reach 100% of the original loan value + the required overpayment, the contract is fulfilled and payments cease.
Zomia established the MAP to increase the sustainability of its lending model while also ensuring that no students repay an unreasonable amount.