Aerial view of Chicago, where ChangeEd is based.
A Chicago-based startup has figured out a simple way to help student borrowers cut down their student debt one penny at a time. The solution simply uses the spare change from routine purchases and applies it directly to student debt balances.
ChangEd, the startup from Chicago, rounds up purchases in your checking account to the next dollar and transfers the money into an account held by the company (ChangEd is FDIC-insured according to the Chicago Tribune). Once you reach $100, the money is automatically sent to your student loan servicer.
The round-up contributions would be in addition to a borrower’s regular monthly payments. The company claims that sending an extra $50 each month could save up to $10,000 in interest based on a 25-year repayment plan on a $37,000 loan.
ChangEd had a soft launch last month and currently has around 1,700 users. Right now, 80 percent of this user base includes U.S. bank accounts, but an update happening later this month will deliver additional coverage. Future updates will also allow users to link credit cards, and friends and families can even use their own spare change towards your loans.
The idea for the app was born after one of the founders—Dan Stelmach—realized he wasn’t making much of a dent in his student loan balance, even though he was diligent about making his monthly payments. He looked at his spare change and the idea for ChangEd was born. They tested out the idea first on friends who had student debt. After looking over their checking account statements, they found potential in the idea.
With roughly 44 million Americans in student loan debt—and more than 11 percent of those loans currently in default—most borrowers would love any help to pay down that debt faster.
ChangEd isn't the only company trying to offer solutions. Back in November of 2016, SoFi announced a cash-out refinance program, dubbed the Student Loan Payoff Refi, that targeted student debtors who were eligible to refinance a mortgage. The program banked on participants using their equity to pay off a portion of their student loans while receiving a better deal on their mortgage.
Image Copyright © Roman Boed