One startup’s solution to your student loan debt
Student loan debt plagues our nation. Totaling around $1.3 trillion dollars, it’s no wonder that it’s called a crisis. Millennials are putting off marriage and starting families because of it, and young entrepreneurs are holding back on starting businesses.
But what if there were something to take the edge off that 10-year (or 20-year) monkey on your back?
A Boston startup called Gradifi wants to do just that — by having your boss foot part of the bill. (Yes, you read that right.) Under Gradifi’s Student Loan Paydown plan, your employer would pay up to $250 every month toward your student loans.
Think of it this way: If you have $35,000 in student loan debt (the average for college graduates today), you will end up paying back a total of $42,000 on a 10-year payment plan with a 4.5 percent interest rate (the average federal loan rate today). If an employer contributes $100 a month for six years or so, that contribution takes 2.5 years or 25 percent off the loan. This means that a 22-year-old who was originally looking at being in debt until 32 will now be debt-free by 29.
OK, so this sounds pretty great, but there must be a caveat, right? What’s in it for the employer?
Well, it’s you. Companies are always trying to come up with ways to attract and retain talent. Turnover and recruiting are big expenses, and, according to Gradifi’s founder and CEO Tim DeMello, are more costly for employers than it would be to contribute toward employees’ student loans. And while many companies try to lure workers with attractive retirement benefits like 401(k)s, companies are finding that most recent graduates are more concerned with immediate needs like paying off their soul-crushing student debt.
I reported on Gradifi for PBS member station WGBH’s local news and analysis program Greater Boston, hosted by Jim Braude. Watch the report above for a closer look on how Gradifi works and whether it’s really a pie in the sky or an innovative solution to tackling student loan debt.