This week New York City-based Student Loan Hero launched its web-based platform, which aims to help students create a plan to pay off their student loans and ultimately get their debts paid off faster. The idea for the platform was sparked by co-founder Andy Josuweit’s own experience in college, which left him over $100,000 in debt. The company’s platform gives students in the U.S. a way to view their private and federal loans in one place, while helping them pick a strategy to get their loans paid off faster.
Josuweit said it was his $100,000 debtload, a total of 12 loans with four different companies, that led him to build Student Loan Hero (the average U.S. student graduates with over $23,000 in debt). ”I was 17 years old when I was signing loan documents for $20,000, $30,000 at a time, and I think that’s the real problem,” he said in an interview. “I went to a college and nobody really said hey, maybe you should look at a different school.”
While eventually Josuweit wants to target the platform at students before they go to school to help them evaluate which schools they can afford and to track their loans, right now it’s targeted to graduates who are repaying their debts. Students can connect their public loans from companies like Sallie May, as well as federal loans, which are accessed through the National Student Loan Data System (NSLDS). Students provide their login details and the company aggregates their loans in a dashboard, showing details like the amount of the loan, interest rate, contact details for the loan provider, how much of a payment goes to the principal, the minimum payment, and time it will take to pay off the loan.
Once a student’s loans are aggregated, they can see a snapshot of the total they owe, the amount of interest they’re paying monthly, and their average interest rate. They can then choose the amount of their monthly payment (either the minimum interest payments, or a higher amount). Then they choose from one of three strategies to pay off the debts: just the minimum payments; Fast Track, which sorts by the highest interest rate and pays those loans first; and Debt Snowball, which pays off loans with the lowest principal first. While the Fast Track strategy is the smartest in the long run, Josuweit said the Debt Snowball can help students feel like they’re making progress since it eliminates smaller loans. Based on the strategy they choose, the platform then advises students on which loans to pay off first.
The platform also focuses on education, explaining to students why choosing one strategy over another is a smart financial decision. It also features a glossary of over 250 financial terms to help students understand their loan terminology, and Josuweit said they’re working on building out a charts section that graph principal vs. interest, loans over time, and a loan vs. income projection.
“At the end of the day it’s a very fragmented industry and what we’re trying to do is make it easier for students to repay their loans and figure out what makes the most sense for them to get out of debt faster and save some money along the way,” Josuweit said.
Josuweit said they’re one of the only tools that combine federal and private loan information in one place, though there are other tools like LoanLook that offer similar functionality. Similar platform Tuition.io already lets students aggregate their federal and private loans in an online dashboard, and that company’s founder has a similar back story of starting the company because he was over $120,000 in debt after graduation (only 1.5 percent of students graduate with six-figure debt). As of this summer, Tuition.io is now managing over $60 million in student loan debt, though it is still in private beta. And companies like AllTuition, SoFi and others are trying to tackle other aspects of students loans, from finding grants to getting loans from alumni.
While currently Student Loan Hero is free for students, Josuweit said they have several plans for monetization, including licensing the platform to schools to teach financial literacy, and to banks to help them lower their collection costs. They also plan to give students the ability to pay their loans directly through Student Loan Hero (they would take a transaction fee from each payment), and they also want to offer private loan consolidations to help students refinance their loans at lower interest rates.
The company, which was part of the Startup Chile startup accelerator, launched in public beta earlier this summer, and Josuweit said current users have an average of seven loans. There’s no doubt that student debt is crippling – according to The New York Times, there is over $870 billion in unpaid student loans in the U.S. alone. With a focus on helping students approach their existing loans in a smarter way, Student Loan Hero will likely find a base of savings-minded students looking to make a dent in their debt.