Using technology to increase financial literacy Julia Joggerst, CommonBond

Transcription

1 Massachusetts Association of Student Financial Aid Administrators Using technology to increase financial literacy Julia Joggerst, CommonBond 1

2 Introduction CommonBond Julia Joggerst Director CommonBond is a leading student lender on a mission to make personal finance more affordable, more transparent, and easier to manage for students 2

3 The CommonBond story 2011 Founded by three grad school students 2012 Launch of pilot at UPenn 2013 National launch of student loan product 2016 Introduced CommonBond for Business Founding team (from L to R): Mike Taormina, Jessup Shean, David Klein Today Lending to 2,000+ schools 3

4 Agenda The student debt dilemma Stages of the borrower journey Technology for selecting and paying for school Technology for managing debt after graduation 4

5 The student debt dilemma 5

6 Student debt has reached new levels in the United States $1.4T 44M $1.4T in outstanding student debt 44M people have student debt 7 out of 10 millennials graduate college with student debt Sources: Debt statistics $1.4T in outstanding debt: MarketWatch; 44M people have student debt and 7 out of 10 millennials graduate college with student debt: Student Loan Hero 6

7 It is the single biggest challenge facing millennials today Growth of student debt Source: 7

8 And it is impacting graduates at all levels of education Average student debt by degree $250K $200K $150K $100K $50K $35k $57k $56k $112k $176k $247k $0K Undergraduate Graduate MBA JD MD DDS Sources: Debt statistics - Undergraduates: Edvisors; Graduates: U.S. News & World Report; MBAs: U.S. News & World Report; Doctors: Association of American Medical Colleges; Dentists: American Dental Education Association; Lawyers: U.S. News & World Report 8

9 That debt is having a very real impact on millennials life and financial decisions 35% find it difficult to buy daily necessities because of their student loans 53% make career choices based on their student debt 69% are delaying home ownership Sources: Data from: American Student Assistance 2015 Edition of Life Delayed: The Impact of Student Debt on the Lives of Young Americans ; CommonBond 2016 Student Loan Survey of 1,000 college-educated millennials who hold student debt 9

10 Stages of the borrower journey 10

11 There are various stages of the borrower journey of financing their education Selecting a school Paying for school Managing debt after school 11

12 And different considerations at each stage Selecting a school Comparing college costs and financial aid offers Paying for school Maximizing scholarships, grants, and federal loans before private loans Managing debt after school Understanding repayment options and strategies 12

13 When I went to grad school, I didn t have the tools that exist today to help with each stage Selecting a school Paying for school Managing debt after school I selected a school based on reputation I financed my entire MBA using student loans I didn t know refinancing was an option until a friend mentioned it to me 13

14 Technology for selecting and paying for school 14

15 Selecting a school: the CFPB s Compare Financial Aid Offers tool Purpose Prospective students can compare the financial impact down the road of attending the different schools they are considering Features Ease of use by uploading first year financial aid award letter Choose various scenarios o In-state versus out-of-state o On campus versus off campus Compare costs of schools and housing options side by side 15

16 Paying for school: the College Board s Scholarship Search tool Purpose Students can find scholarships and other financial aid from more than 2,200 programs, totaling nearly $6 billion Features Enter personal, academic, and affiliation information as well as type of award to see all possible matches The more information entered, the more relevant matches shown 16

17 Paying for school: NextGenVest s Money Mentors Program Purpose Over one million students pay too much for college NextGenVest exists to fix this problem Features Matches prospective college students with current college students mentors trained to help them find the most cost effective way to pay for college Mentors also answer questions like How do I find scholarships I can actually apply to? and Am I filling out the right FAFSA forms? 17

18 Paying for school: CommonBond s Undergraduate Student Loan Calculator Step 1: Obtain shopping sheet Step 2: Drag and drop shopping sheet into CommonBond s calculator Step 3: View results that include: Exactly how much is needed to borrow for school And then the future impact of repayment choices 18

19 Technology for managing debt after graduation 19

20 Managing debt after graduation: Student Loan Hero s Income Based Repayment Calculator Purpose Help graduates who are having a difficult time affording loan payments understand what IBR could mean for them Features Comparison of original plan versus IBR o Monthly payments o Total balance paid o Total forgiveness o Repayment terms Additional guides and materials on IBR 20

21 Managing debt after graduation: CommonBond s Student Loan Refinancing Calculator Purpose Compare current student loan rates with rates for refinancing student loans Calculate how much you can save by refinancing your student loans Features Compares features of original loan versus refinanced loan, including interest, monthly payments, rate, and term in years 21

22 Thank you! Julia Joggerst Director CommonBond 22

23 Visit commonbond.co/disclaimers for more information Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # ). The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate (ACH discount) by agreeing to automatic payment withdrawals once in repayment, which is reflected in the APR shown for Full Principal and Interest Repayment Plan loans. Variable rates may increase after consummation. All variable rates are based on 1- month LIBOR as of May 25, Borrowers may select one of four Repayment Plans. Under the Full Deferment Repayment Plan option, interest and principal may be deferred while a borrower is enrolled in school on at least a half time basis, and for an additional six month grace period (up to a maximum of 60 consecutive months) following (i) graduation, (ii) termination of enrollment, or (iii) if a borrower ceases enrollment on at least a half-time basis, at which time interest is capitalized and payments will increase to full principal and interest payments for the loan term selected by the borrower. There are three other Repayment Plan options available, an Interest Only Repayment plan, in which principal will be deferred and payments made on interest only during the same period described above after which payments will increase to full principal and interest payments, a Flat Repayment plan, in which payments of $25 will be made during the same period described above after which payments will increase to full principal and interest payments, and a Full Principal and Interest Repayment plan, in which payments will begin immediately after disbursement. A borrower's actual APR may vary depending on the repayment option selected by the borrower. The dollar amount of the origination fee is based on the amount borrowed and will be added to the outstanding loan balance upon disbursement. Loans are not offered or endorsed by the educational institution that you are attending. CommonBond is not affiliated with any educational institution. The Flat Repayment plan, in which payments of $25 will be made while a borrower is enrolled in school on at least a half time basis, and for an additional six month grace period (up to a maximum of 60 consecutive months) following (i) graduation, (ii) termination of enrollment, or (iii) if a borrower ceases enrollment on at least a half-time basis, at which time interest is capitalized and payments will increase to full principal and interest payments for the loan term selected by the borrower. On a $10,000 loan, at a Fixed APR of 7.97% with a 10-year loan term, a Flat Repayment plan loan would have a monthly payment of $25 while the borrower is in school and a monthly payment of $ when the borrower enters repayment after graduation and the applicable grace period. All loans are eligible for a 0.25% reduction in interest rate (ACH discount) by agreeing to automatic payment withdrawals once in repayment. 23