Student management

Fintechs clamor to provide relief options for student borrowers – TechCrunch

Since March 2020, student borrowers have not had to make federal student loan repayments. These payments are expected to resume from May 1, 2022, which will undoubtedly cause stress for borrowers.

President Biden may consider extending temporary student loan relief beyond that date, but nothing is official yet.

On March 9, Biden said he would cancel $6.2 billion in student loans for 100,000 pre-identified borrowers through changes to student loan forgiveness.

While this is certainly good news for those 100,000 borrowers, there are still about 46 million more who are still struggling with student loan debt.

As such, it’s no surprise that a number of fintechs are keen to help borrowers – current or future – in one capacity or another. Here, we’ll unpack the efforts of three: Credit Karma, Chipper, and Betterment.

credit karma

In an exclusive interview with TechCrunch, Josh Dockery, Credit Karma’s product manager for student loans, shared a preview of the company’s launch of a new product aimed at helping federal borrowers find payment relief “tailored to their financial needs.”

The move marks the 15-year-old company’s first foray into providing relief options to student borrowers. Credit Karma estimates that 22 million of its more than 110 million members in the United States hold more than half of the total student loan debt in America. In one study he conducted, Credit Karma found that many borrowers with outstanding student loan debt had to sacrifice necessities like groceries and paying rent in order to maintain student loan payments.

His goal with his new offering is to help federal borrowers struggling to stay afloat see if they qualify for loan forgiveness or to help them adjust their loan repayments to ensure they don’t back down. not. That way, they have a better chance of being approved for other financial products down the line, he maintains.

“Ninety percent of student loans are federal, not private, loans. Through speaking with members, we discovered and understood that it is not always easy to navigate the benefits of federal student loans,” Dockery told TechCrunch. “The questions that were asked are “Am I eligible?”, “How can I apply?” We want to make sure they are aware that help is available and help them understand, educate and provide them with options that we believe they are eligible for.

Credit Karma says its visibility into its members’ financial profiles gives them a way to offer personalized estimates and recommendations on how borrowers can lower their monthly payments. He also wants to help eligible people apply for an Income-Based Repayment Plan (IDR) or Public Service Loan Forgiveness (PSLF) through his partnership with Summer – free of charge.

“One of the reasons we felt it was important to focus on this is that payments could resume on May 1 and over 60% of our members say they are not ready for this to resume. , and don’t think they can make payments,” Dockery said. high costs, higher cost of living and higher gas prices, which are also affected by the Ukraine/Russia conflict. All of this puts a ton of stress on people.

Even if the forbearance is extended, Credit Karma’s view is that its new program can still help its members and simply gives them more time to put in place any potential relief or payment plans.

Credit Karma earns its revenue in part by charging referral fees to credit products. So if more people can claim it, the more money it can make.

Crusher

Tony Aguilar based Crusher in 2018 after carrying over $100,000 in student debt after college. He grew up and went to high school in a small town in Texas and his mission with the startup is to help people in the United States better manage their student debt and “reduce” it faster.

The Austin-based startup has designed an app aimed at doing just that. Since its launch in 2020, Chipper has amassed a user base of over 80,000. It claims to help users pay off their student loans four years faster and save an average of $309 per month. And he says his app has generated over $81 million. in student loan forgiveness for qualified applicants.

Chipper says he is looking at more than 150 forgiveness programs, including the Civil Service Loan Forgiveness (PSLF) and the Teacher Loan Forgiveness. In the case of PSLF, the company says it can assess a borrower’s payment history and employer eligibility and automatically collect their signatures on the appropriate forms.

As for loan repayment plans, Chipper says he will analyze whether borrowers are in the “best repayment plan for their needs.” If not, it will help them to apply and register for a new program directly from its application. It also gives users a way to round up daily purchases and apply that amount to their student loans. The company recently launched a new program called Chipper Rewards, which offers its users cash back on their loans.

In anticipation of the moratorium being lifted, Chipper exclusively told TechCrunch that he raised $5.6 million in seed funding so he could “help even more people…pay ​​off student loan debt in simple app”. The money will primarily go to “team growth, marketing and product expansion,” he said.

The company is currently growing 40% month over month, according to Aguilar. Its income is obtained through a tiered membership program. It’s free for users to sync loans from their lender and explore forgiveness and repayment options.

Picture credits: Founder and CEO Tony Aguilar / Chipper

Users also have the option to sign up with its premium product, Chipper+, for additional support, automatic enrollment in forgiveness or refund programs, and access to roundups for $4 per month. Users can also access the roundup service on their own for $2/month.

For now, all Chipper services are free until the loan moratorium is lifted on May 1, as borrowers are not making payments.

As a first-generation Latinx entrepreneur, CEO Aguilar joined The Cap Table Coalition — an initiative that asks founders to allocate 10% of all their funding rounds to the organization to distribute to black, Latinx and other underrepresented investors — when raising capital. As part of its commitment to give back to the community, Aguilar is increasing this commitment to 25%.

Freestyle Capital, Slauson & Co. and Propel Venture co-led the seed funding. Other backers include investors from the Cap Table Coalition and fintech angels such as Ethan Blochfounder and CEO of Digit; John Henry, co-founder of Loop; and Craig Lewisco-founder and CEO of Gig Wage.

“This funding will allow us to expand our user base and help borrowers through their student loan journey from start to finish,” Aguilar said.

Improvement

In February, Betterment revealed a new product focused on managing student loans. The 14-year-old company has historically provided robo-advisory and cash management services. With its expansion into student loan servicing, Betterment says any employee who has a 401(k) retirement plan with the company will be able to see their loans alongside their other financial accounts, receive personalized repayment recommendations, and deduct loan repayments directly from their salary, among other things.

The company says the move was designed with the potential end of the student loan moratorium in mind. Quoting a investigation which found 93% of borrowers don’t feel ready to resume payments on May 1, Betterment said he believes employers can offer college payment benefits “that address their financial life stages.” as a benefit to help attract and retain talent.

The student debt problem is huge in this country, and I’m sure we’ll only see more fintechs over time coming up with potential solutions to help solve it. Now, if we can prevent it from perpetuating itself in the future, we will be in good shape.

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