Currently, there are 45 million people who owe $1.6 trillion in student debt in the U.S., according to CollegeDebt.com. And 70% of students graduate college with student loan debt. The average amount of time it takes to pay off loans is 22 years and 37% of people have missed at least one payment.
Goodly, a Y Combinator startup accelerator alum, has developed a model to help companies retain talent while helping solve the student debt crisis. How does it work? Employers can use Goodly to offer $100 per month in student loan payback for a $6 fee. This also incentivizes talent to stay at the company.
Y Combinator participated in this round along with ACE & Company, Arab Angel, Zeno Ventures and angel investors Pete Koomen (Optimizely co-founder and CTO), Josh Jones (DreamHost founder), Jason Hodges (ShipStation co-founder), Avlok Kohli (founder and former CEO of Fairy) and Mo Al Adham (co-founder and former CEO of Telly).
Goodly determined that 86% of employees would stay at a company for at least five years if their employer helped pay down student loans. And employers break even if the workers stay for just extra months and get a 5X return if employees stay for an extra year since the cost of hiring and training replacement staff is so high.
To further accelerate this model, Goodly raised $1.3 million in seed funding led by Norwest according to TechCrunch. Since student debt is becoming a dark cloud hanging over many employees, corporate America is expected to offer payback solutions from 4% of companies today to 32% by 2021.
Goodly co-founder and CEO Greg Poulin told TechCrunch that he had personal stresses with student loan debt. “When I was in school, my father passed away very unexpectedly due to a heart attack. I had to borrow $80,000 for college at Dartmouth,” said Poulin via TechCrunch.
Poulin is paying $900 per month towards student debt and he said that the stress that debt creates can poison the rest of your life. About 21% of employees with student loan debt have delayed marriages and 28% have putt off starting a family. Plus 1 out of 8 divorces are now directly attributed to student loan debt. Poulin explained that he has seen first-hand how challenging it is for employees to save for retirement or start a family when they are dealing with debt.
Goodly co-founder and CTO Hemant Verma met Poulin while they were working together at an employee onboard startup called Rippling. While working there, the two of them learned that the benefits sign-up process could become its own service. Benefits generally have to be integrated into a company’s financial software system including payroll along with proper provisioning access. The goal that Poulin and Verma have is to build a “set it and forget it” system to automate everything. About 30-40% of employees have adopted to the $6 per month charge for the service. Instead of helping with monthly payments with interest, Goodly’s clients pay down the core debt. And employees can review a dashboard to track their debt and all of the contributions that their employer has made. Since launching, Goodly, has not seen a single customer churn.
Goodly also participated in the StartOut GrowthLab — which is an accelerator for LGBTQ founders — and also focuses on student debt due to its link to diversity and inclusion. Women have two-thirds of the student loan debt in the U.S. And black and Latinx Americans have 31% higher student debt than others. And the average LGBTQ borrower owes $16,000 more than the general population.