Young People Sell Future Earnings To Investors
A new industry is offering people the chance to "sell" a portion of themselves to investors in return for a cut of their future earnings.
Start-up companies such as Pave match carefully vetted, mainly young individuals, known as "prospects" with those willing to offer a one-time cash infusion.
On average prospects seek to raise around $20,000 (£12,100), although so far amounts have ranged between $3,000 (£1,800) and $50,000 (£30,300).
They choose to repay up to 10% of their future earnings on an annual basis for either five or 10 years.
Pave determines what the percentage repayment will be based on the qualifications of the candidate.
The company's co-founder and COO Oren Bass told Sky News: "There's a huge debt issue in the States, particularly for young people.
"They don't have a funding option that really enables them to make choices to think long-term. So there are two big issues that Pave addresses.
"One is that under the Pave agreement the payments are always linked to income so they are by definition always affordable, and that allows the prospect to actually take risks that they may not have taken if their funding was debt for example, which is a specified payment regardless of what happens to you during their lifetime.
"The second value proposition is that because real people are actually funding you, you can benefit from their guidance and their mentorship and advice."
Many of the prospects are social entrepreneurs who are saddled with student loans, but there are also journalists and musicians on the site.
Ify Walker has founded her own education recruitment company and is a typical prospect: bright, driven and keen to monetise her potential.
She told Sky News: "My husband and I went to law school and we both have several degrees and we walked out with over $200,000 dollars in loans.
"Pave is one of the very few organisations that is saying look, we have a solution to this: we want to accelerate the potential of young people and we want to do that immediately, we don't want to wait ten years for people to give their best selves to society, so let's actually do that now, let's take backers who have resources, let's connect them to people who have a vision and a goal and let's make that partnership work for the better of our community and our world."
There are protections in place for those who choose this alternative method of funding.
If prospects don't earn above a certain amount, they don't have to pay, which sets the arrangement apart from a traditional fixed debt scenario, and if an individual becomes very successful they can choose to buy themselves out of the contract for five times the amount raised.
Almost half of the prospects at Pave use their investment to pay off punitive debt.
They also often have multiple backers, allowing them access to more expertise and networks than might be afforded by a single investor.
Upstart is another company with a similar set up.
It caps payments at up to 7% of earnings.
Like Pave, it takes a 3% fee from its "upstarts" and a smaller service fee from investors.
Hedge fund partner Benjamin Borton has invested in five upstarts.
He said: "There's an economic return and a social return.
"If you invest in a company, particularly a start-up company, the numbers would suggest that 50% of those will go out of business, whereas if you invest in a person, the chance of getting zero pay back is very low if you are good at choosing someone.
"So even if they take a job and that job doesn't work out, they can go on to the next one.
"If we can accelerate the speed with which these kids get to that place of optimal productivity, then we've done great and I think if you do that, then you are going to achieve a good rate of return as well."
So far 282 backers have invested more than $2m (£1.2m) through Upstart. Almost 200 individuals have achieved their funding goals.
The state of Orgeon has recently given preliminary approval for public universities to pilot the model for students.
One company called Fantex is trying to sell stock in American football players, although it has had limited success so far.
Sceptics warn that this is an as-yet unregulated industry, and there is nothing to stop someone setting up a more exploitative business as long as it operates within the law.
:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.