4 DC-area fintech companies taking on college affordability - Technical.ly DC

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Oct. 31, 2016 12:23 pm

4 DC-area fintech companies taking on college affordability

These local startups aren't shying away from the challenge of putting college within reach.

(Photo by Flickr user Pictures of Money, used under a Creative Commons license)

Figuring out how to pay for college is an increasingly expensive challenge, and that reality hasn’t gone unnoticed. For proof, look no further than the discussion surrounding college tuition and college debt during this election cycle.

But in the meantime, while there’s little agreement about policy, a variety of D.C. startups are stepping into the fray and offering fintech solutions to help today’s college students save and pay for their education. From making saving for college easier to opening up financing options for a new range of students, these companies are tackling big, tough challenges. And, so far, they’re rocking it.

Here are four local fintech companies doing interesting work in the college finance space.

1. Leaf College Savings

Arlington, Va.-based Leaf College Savings identifies its origin in the moment when cofounder Chris Duffus wanted to give his young niece a couple hundred dollars toward her college tuition, but didn’t want to have to open a whole separate savings account.

“I did some research,” he told Technical.ly, “and it was a real pain in the butt.”

So Duffus took his experience in finance (former Goldman Sachs investment banker) and tech (founding CFO of Govolution, a government payments system) and directed it toward the college tuition savings issue. Because, Duffus said, all you hear about college is that it’s insanely expensive. But actually, if you plan to attend a state university, saving money doesn’t need to be very overwhelming if your middle-class parents start early enough.

Launched about 18 months ago, Leaf is that “solution toward increasing college affordability.” Leaf started out with gift cards before transitioning to the employee benefits space. Essentially, Leaf aims to bring the 529 college savings plan out of (relative) obscurity. “Most people wouldn’t know about it unless they had a financial advisor,” Duffus assures me, when I admit I’ve got no idea what a 529 plan is. But if employers have Leaf, employees can chose to contribute to a 529 just like healthcare or a 401K and employers can offer matching contributions. Historically, 529 plans have been individual — Leaf repackages them for the group benefits market.

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“We’ve created a new product category,” Duffus said. “So our challenge has been making companies aware that this is an option.”

2. MPOWER Financing

Life moves fast when you’re a startup. Since we last checked in with MPOWER Financing about a year ago, the company has raised a $6 million Series A and doubled the size of its team.

“We’re less of a startup and more of a growth-stage company,” cofounder Emmanuel Smadja told Technical.ly. But the core goal is still the same — to offer loans to high potential students left out of traditional financing.

MPOWER does this by assessing credit worthiness based not on a traditional credit score (something so many young people lack) but on other factors like grades, degree program, internship experience and more. MPOWER is currently raising $150 million for its student loan fund — the company plans to go from giving dozens or hundreds of loans this year to thousands next.

3. TuitionCoin

So you graduated from college, though not without some student debt. Now you’re out in the world and working and you’d like to refinance. Where do you turn? Options like SoFi primarily work with those who have super-prime credit (sort of a 1 percent of people) — so what if you’ve got “prime” credit?

This is where TuitionCoin comes in. The Leesburg, Va.-based company is in the business of refinancing student loans — focusing on prime credit risk. Why does founder Eric Smeby feel comfortable taking the extra risk? Because he’s got an algorithm that looks at the school you went to and the degree you got and the job you have and predicts your financial future far better (he says) than a credit score could. TuitionCoin is focused on Virginia for now, as all states have different laws surrounding refinancing. Still, the company hopes to expand.

Smeby, who has a background in finance, education and engineering (all the right things, it seems), truly believes in the value of higher education, despite the bad rap it can get for being too expensive for the value it delivers. That, in a nutshell, is what keeps him excited to come into work every day.

4. Pay Your Tuition (PYT) Funds

A list of local fintech startups in the college finance space would be remiss to leave out Vinetta Project $20K pitch challenge finalist and current Halcyon Incubator member PYT Funds. The hybrid crowdfunding and alternative financing company is hard at work in the Halcyon cohort, working to help high-potential students from low-income backgrounds get the micro loans they need to finish college. Read more about how it all works in our profile of the company here.

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