Americans carry $1.3 trillion in student debt collectively, according to estimates by The Pew Research Center. The median borrower owes $17,000.
When figures are that high, setting aside a few nickels and dimes doesn’t seem like it could make much difference — but ChangEd thinks it can.
The startup helps borrowers pay off their debts using spare change. Once a user links ChangEd to their bank account, all purchases are rounded up to the nearest dollar. (Even dollar purchases are rounded up a buck).
Once a user hits $100 in saved change, ChangEd makes a payment to the user's loan servicer.
“On average, users are rounding up $30 to $50 a month. Some of our ‘power users’ are saving close to $100 a month in spare change roundups,” said co-founder Nick Sky. “Since we’re aligning with their natural spending, they’re really not feeling it impact their budgets that much.”
Savings are tracked on an in-app dashboard that shows how much is being saved on interest and how many years are being knocked off the life of the loan. According to Sky, one of ChangEd's first $100 payments ended up saving the user $77 in lifetime interest costs.
ChangEd was born out of co-founder Dan Stelmach's frustrations with his own student loans. Stelmach said he was spending almost $800 a month to pay off his student loans when he realized something needed to change.
After coming up with the idea of using spare change to pay off his debt, Stelmach brought the idea to Sky. The two began researching the student loan industry and wireframing the ChangEd app.
To ensure that users aren't hit with unexpected major withdrawals (and keep passive savings from feeling aggressive), ChangEd makes withdrawals of $5 to $10 at a time.
The money is put into a personal FDIC-insured account created by the startup. All a user needs to do is link their bank account and provide information about their student loan.
ChangEd currently has relationships with 95 percent of United States banks and 90 percent of all student loan servicers.
ChangEd launched in March of 2017, seeing an early user boost when it was highlighted by Apple as one of its “New Apps We Love.” It has acquired just over 3,000 users since, mostly through word of mouth.
The app is free to download but the startup charges a $1.00 monthly fee –– pulled from spare change roundups –– to help cover the cost of transfers.
While several startups are already making use of the spare change roundup mechanic, none are applying it to student loans. Acorns uses spare change for investment purposes, and Chicago-based Milo Savings uses change to help people beef up their savings.
Future plans include the release of an Android app and a feature that lets users set up linked accounts for friends and family members. ChangEd is also exploring partnership opportunities with colleges and organizations dedicated to reducing student loan debt.
ChangEd has a four-person team made up of three co-founders and a part-time employee. It's headquartered in 1871, which is also home to fellow student loan repayment startup Peanut Butter.
Images via Shutterstock.
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