$1.5 trillion. That’s the amount of outstanding student loan debt held by American citizens according to the New York Fed. It is an astronomical sum, and has led to much hand-wringing about whether there is a coming bubble in U.S. higher education.
What’s
even worse than the scale of the debt load though is the fact that for
millions of borrowers, they literally don’t have to pay some of those
dollars. Thanks to the complexity of the loan system in the U.S.,
borrowers often qualify for repayment programs that can lead to loan
forgiveness, that is, if they can figure out the terms, apply correctly,
and actively follow the rules to net the write-off.
Enter Summer.
The public benefit corporation is on a mission to act as a “trusted
advisor” to student loan borrowers. Through its platform, borrowers can
get a full 360-degree view of their current student loan situation, and
begin exploring options for how to repay it in the most financially
efficient way possible.
The company’s early traction has brought it a new round of venture capital. The company announced this morning that QED Investors,
one of the leading early-stage fintech investors out there, led a $10
million series A round in the company. Partner Matt Risley led the deal,
who joined QED about two year ago from European fintech giant Klarna,
where he was CFO.
Co-founder and CEO Will Sealy analogized Summer
to how tax accountants help filers handle the complexities of doing
their taxes. “We’re trying to create the software that democratizes
[student loan] expertise, that gets the expertise into the hands of the
end consumer, who might not be able to afford an accountant that doesn’t
even unfortunately exist in the student loan space at this current
moment,” he said.
He noted that the company is building out
support for 120 loan forgiveness programs and their complicated rules,
and has its eyes on more than a hundred other student loan proposals
that are sitting in state legislatures across the country.
The
company was started at Yale by Sealy and co-founders Paul Joo and
Vincent Tran, and the trio eventually migrated to New York City while
building the team to 13 according to its staffing page.
Sealy previously worked at the Consumer Financial Protection Bureau in
DC in the Office of Students, where he worked on precisely the
challenges of getting students better access to quality information
around student loan programs.
So far, Summer, which launched in 2017, has helped 10,000 borrowers
to date, and “just in this year, we have helped borrowers save $8
million,” Sealy said. “A critical metric is not just how many people we
are engaging, but how much money we’re saving them.”
Summer does
not charge end users to use its product. Instead, it sells through
enterprises and other types of organizations to offer the product as a
benefit to employees. Sealy gave the example of medical associations,
who could offer Summer to recent medical school graduates, or companies
who want to entice recent grads with a simple tool that can improve
their financial lives.
Summer currently works retrospectively, in
that it targets users who are post-grads. I asked why Summer didn’t
focus prospectively on helping borrowers think through their student
loan products before they take them on. Sealy replied that “In many
ways, it feels like the house is on fire. So before we would ever go
about trying to create a better smoke detector and build a new home, we
want to save the people who are currently struggling.”
Risley of
QED explained his rationale for leading the round. “QED, like the rest
of the investors like General Catalyst and Story Ventures, we put a
pretty big round into this company on the belief that there’s an urgent
problem facing these student loan borrowers and we’re working hard to …
scale to meet the needs of tens of millions of student borrowers.” With
10,000 users and $8 million saved, you can start to project out the
potential impact Summer could have for many borrowers.
In addition to QED, the round had participation from General Catalyst, Greycroft, NextView Ventures, and Story Ventures.
Update: Changed the lead partner’s name from Matt Burton to Matt Risley at QED.
Source. TechCrunch, Danny Crichton, September 26, 2019
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