Hi everyone, Charley here.

New topic for me today, but one that we’re all very familiar with: student debt (yes, I’m on a lending kick the past month, don’t @ me). The pandemic has had a profound effect on the financial services industry, and one area that investors are now taking a closer look at again is student lending. I wanted to spend some time investigating what’s happening as well as where some investors are starting to deploy capital back in again.


Fintech Today With Launch House

Founding a company during a pandemic can be a lonely endeavor. Enter Launch House, an exclusive community of 300+ founders that offers fundraising support, and partnerships with top creators that can make going from 0-1 easier than ever before.

They have a one month residency beginning Nov 28th in LA with < 20 spots for the brightest Founders.

The community members will be living together in a, direct quote from the team, “super dope” 3,000 sq foot Beverly Hills mansion. While there, residents will be meeting with heavyweights of the fintech community, learning from their fellow founders, and building their companies all at the same time. Beyond the first month, you gain continued access to the highly engaged community and network of investors/creators. Members who have gone through the program have raised millions from top-tier VCs like a16z and Sequoia.

To apply for the upcoming cohort, click here.


CARES Act Ending

Back in March of 2020 as part of the CARES act, the US Department of Education temporarily suspended loan payments and applied a 0% interest rate across the pandemic for loans owned by the Department of Education. The program was extended multiple times afterwards as the pandemic continued, but in less than 100 days (on Jan 31), the government will restart collecting on student loans. The Biden administration is apparently developing plans on how it’s going to restart federal student loan payments for tens of millions of Americans, but one way or another, it’s probably going to be a bit chaotic and confusing for many people.

Against this whole background, student debt exposure continues to grow in the United States. All of us have family members, friends or are personally trying to navigate through the maze of regulation, repayment schedules, minimum payments, interest rates, alphabet soup agencies, etc. College students today, on average, graduate with $29k of private and federal loan debt and default on their loans at a rate of 15%. Meanwhile, overall US consumer debt continues to increase, with an average American holding an overall debt burden of $92k. Over the past year, student loans saw the largest growth in average balances at nearly 9%, followed by average auto loan debt and mortgage debt.

The freeze (for better or for worse) effectively wiped out the business model for a lot of companies in the student lending space. To further add to the chaos, several student loan servicers decided to exit the federal servicing business (Navient, PHEAA, Granite State, and UHEAA). However, with the freeze being lifted, $1.7T of payments will need to be managed, serviced, and collected. Thus, the timing seems right for a new crop of companies to emerge. We’ve seen established players like SoFi add on other products (and heck, even companies) in order to diversify. We’ve also seen new business models emerge, such as Commonbond creating a B2B offering for companies to contribute to student loans as a corporate benefit or Acorns acquiring Pillar to help its consumers manage student loan debt.

A New Cohort

We’re also starting to see the next wave of student loan debt infrastructure start to emerge! Players in the space that are on my radar include:

  • Spinwheel: Recently raised $11M led by QED with Core Innovation Capital, Fika Ventures, and Firebolt Ventures (full disclosure, I’m a small investor!)
  • Payitoff: Recently announced a $8.5M seed round led by Lightspeed Venture Partners
  • Rightfoot: Announced its $5M seed in Feb 2021 led by Bain Capital Ventures and joined by Boxgroup
  • Plaid’s liabilities API (for those that are new here, I was one of Plaid’s early employees)

Each company has taken different approaches towards how much they build vs buy when it comes to their own internal stack. For example, Rightfoot partners with Plaid and Dwolla to provide some of its data + write capabilities while Spinwheel has built its own data integrations into debt servicers - and even provides fully white-labeled “smart” experiences for calculating refinancing payments on the fly that its customers can pull off the shelf. Payitoff has also built out its own integrations and provides access to payment capabilities + repayment enrollment programs.

In my opinion, the key comes down to coverage + data accuracy and then secondarily, the additional features built on top of that data for different types of companies. As embedded fintech becomes more “mainstream,” the thesis is that more and more companies will want to offer products that help consumers solve main stresses in life + increase product stickiness - and student debt is a super fascinating place to start. I expect there to be more updates over the next few months on how the administration plans on restarting student debt payments and it’ll be interesting to see how companies respond to regulation in real time.


Charley Ma is currently GM of Fintech at Alloy, where he focuses on the go-to-market strategy for the fintech vertical. Prior to Alloy, he was head of growth at Ramp. Previously, he was the first growth hire at Plaid, where he started its fintech sales team and opened the NYC office prior to the announced exit to Visa for $5.3B. Charley is also an active angel investor in fintech + developer infrastructure and enjoys a good tweet.

image/svg+xml Prev Next image/svg+xml

FTT+ Expert Charley Ma On the Future of Fintech and Student Lending



Screen Shot 2021-11-19 at 2.12.14 PM.png
FTT Update:
CITADEL FRONTRUNS THE DAO
Hi all, Julie here. Sad news to share today. Earlier this week, Brandon Dewitt, ...
image/svg+xml
Screen Shot 2021-11-11 at 10.35.56 AM.png
FTT Special:
Harness Wealth Deep Dive
Hi all, Julie here. When I was at Bloomberg, I wasn’t allowed to invest in stocks ...
image/svg+xml
kelly-sikkema-SiOW0btU0zk-unsplash.jpg
FTT+ Expert Charley Ma On the Future of Fintech and Student Lending
Hi everyone, Charley here. New topic for me today, but one that we’re all very familiar ...
image/svg+xml
TuxTime.jpg
FTT+:
The Big Interviews You Might Have Missed
Hi all, Julie here. Going to do a little shameless self promotion here, so bear ...
image/svg+xml
Screen Shot 2021-11-12 at 12.19.50 PM.png
FTT Update:
Miami Mayor Tells NYC Mayor to Hold His Beer
Hi all, Julie here. It’s Friday again! And there are only 7 of them left in 2021. ...
image/svg+xml
ENS chart.jpg
FTT+:
Christmas.eth Came Early This Year
Hey everyone, Jordan here. Over the past 5-6 months, many of you avid Twitter users ...
image/svg+xml

Don't miss out on any
news and updates!

Try it out now