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The New Human Capital

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Parents fret, sweat, and save to pay for their kids' education. But now there's a company called MyRichUncle that -- in an almost refreshing throwback to late-nineties entrepreneurial exuberance -- sees tuition as, yes, something to monetize.

The business plan: Help pay for students to go to college or grad school in exchange for a take of their future income. Students usually get between $5,000 and $10,000 per semester, and have to pay back 0.5 to 4 percent of their earnings for ten to fifteen years.

"We're breaking down the social barriers of financing education," proclaims twentysomething co-founder Vishal Garg. "We're a for-profit charity." Some wonder, though, if he and his partner, Raza Khan (pictured), have taken the idea of "investing in human capital" a little too far.

But for Marie Gjoni, a sophomore at NYU, the company is a godsend. Without its $3,000, she says, she could not have afforded school this semester. She had even begun hitting up her real (not so rich) uncles. "Something might have worked out, but I really preferred this," she says -- while admitting that at first she felt strange about being an investment. "Now I see them as a benefactor."

MyRichUncle (whose staffers have relocated to midtown after surviving the World Trade Center attack) already supports about 50 kids at schools like Harvard and Columbia, and it has received about 1,000 applications for the 2002-03 school year. So far, it has given almost $750,000 to students and plans to spend at least $3 million more, pending additional investors.

Khan and Garg grew up in Queens, attended Stuyvesant and NYU, and worked in finance before starting the business. "I looked around and saw that real value was in people," explains Khan.

Of course, not all people are created equal. So company staffers scrutinize applicants' SAT scores, grades, and essays about life goals. The information is then plugged into the "valuation engine." Recently, Khan salivated over one kid with ultra-high scores and "power lawyer" aspirations: "He's tremendous!"

As for charges that they're trading in modern-day servitude, the founders argue that exorbitant tuitions -- and Sallie Mae -- are what really shackle students. "The key here is free will," says Garg. Unlike loan recipients, MyRichUncle students pay only if they make money.

But some education experts are skeptical that the idea will pay off. "I find it astonishing that someone could try to make money in this," says Dr. Bruce Johnstone, director of the Comparative Higher Education Finance and Accessibility Project. He argues that those making big salaries will never earn enough to balance out those making little or nothing.

Khan and Garg counter that they've done extensive research on students' rates of return (higher than stocks', they say, though that's not such a reassuring comparison these days). And while details are thin, they also plan to expand into the potentially lucrative fields of sports and entertainment. It remains to be seen, however, whether the "valuation engine" will be able to I.D. the Britneys of tomorrow.


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