GradeFund isn’t actually issuing the payments, but they’ve setup a system where students can find people to sponsor their good performance in class. For example, students can set a goal of making an A in Physics, get a friend, company, or otherwise able donor to support it, and if the student succeeds (as verified by transcripts), payments are sent either directly to the student or to the respective university on their behalf.
Why would a sponsor want to invest in a student? Aside from family or community members that simply want to support someone they know, GradeFund wants to appeal to corporate sponsors looking to develop students with specific skillsets, potentially as a gateway into hiring them into their company. Rather than sponsor a specific student, GradeFund also lets donors put money towards a specific cause, like rewarding students for making good grades in math and science courses.
It’s an interesting model. Hundreds of millions of dollars are already donated to universities and scholarship funds every year, but GradeFund gives donors very specific control over where their money goes. On the other hand, it does appear to be a for-profit venture (GradeFund takes a small transaction fee), but that shouldn’t discourage most sponsors from using it considering the amount of money that goes to administrative costs through traditional donations.