"The number one problem facing borrowers is clarity.” -Bobby Matson
More than 46 million Americans are buried under a mountain of student loan debt. This overwhelming burden makes them feel stressed and hopeless about ever getting ahead.
Bobby Matson, founder and CEO of PayItOff, an innovative student loan repayment automation firm that helps people free themselves from economic desperation, joined the Banking on Digital Growth Podcast to share his insights about managing student loan debt.
The $1.9+ Trillion-Dollar Problem
Before founding PayItOff, Bobby Matson was facing $78,743 in student loan debt, part of a total six-figure debt between himself and his wife. That’s just a drop in the bucket of a $1.9 trillion-dollar-and-growing problem in the United States, which is the burden of educational debt.
Bobby built the PayItOff algorithm to determine how much debt could be eliminated through careful financial management and available payment programs. PayItOff, along with its workplace partnerships and loan reduction strategies, now saves the average person $60,000 throughout the life of a student loan and an average of $240 per month on payments.
According to Bobby, the best word to sum up PayItOff’s success is “clarity.” Clarity is what his company adds to a traditionally unclear and unwelcoming situation.
Student loans are part of a complex financial world. Terms like interest rates, servicers, refinancing, and so forth create a nearly impenetrable wall of confusion. PayItOff clarifies the characteristics and opportunities within debt, providing the “aha” information people need to move forward.
Engineering Meets Emotions
Bobby comes from a background in engineering at places like Groupon, Stitchfix, Fandango, and Prosper - all organizations with reputations for providing user-friendly solutions. With an eye on his own mounting student debt, Bobby knew there had to be a tech solution.
Bobby wondered why companies like Lemonade could make buying insurance so easy, yet it’s still so hard to figure out how to handle your student loans. He used software to build an engine that codified U.S. regulations for student loans and integrated potential debt relief solutions.
Soon, his friends and family members were asking him to “run their numbers” and see how his program might be able to help them. He saw their emotional pain and abject desperation to lower their debt, realizing they were delighted to gain any sort of clarity into the problem.
In a broad sense, PayItOff is a learning tool, educating people about their educational debt. It opens them up to programs and solutions they wouldn’t otherwise have known existed. Plus, it helps someone with a small amount of student debt just as much as someone with an enormous load of debt.
For example, a doctor in residency might have six-figure student loans, but they’re not yet making the high-dollar income it takes to cover their massive payments. Compare this to someone who took on student debt but didn’t graduate from college. They have $30,000 in loans while working on minimum wage. Both of these people are struggling. Both need help.
A Revolutionary Approach
Wondering how PayItOff works?
We can’t tell you all of Bobby’s secrets, but essentially it’s a tech-fueled blend of solutions for individualized, personalized debt relief. It provides financial education, access to government programs, loan restructuring, and employer-related repayment programs.
When people join PayItOff early enough, they can avoid making student loan mistakes that add $20,000 or more to their debt. For example, many people defer their student loan payments and take forbearances that drive up the total cost. Instead, if they’d selected an income-driven plan with small payments, they would have avoided the financial penalties that increased the total lifetime cost of their debt.
PayItOff brings these options out into the open. Traditionally, student loan companies and servicers have avoided providing this type of information. Doing so doesn’t necessarily benefit them. They’re inclined to allow people to make terrible financial mistakes and charge them for it.
Plus, many borrowers don’t realize they have loans through multiple lenders and companies with varying levels of motivation to help them. Some companies have excellent loan repayment options, but the onus is on the borrower to discover them.
A Holistic Approach to Student Debt Relief
You might be surprised to hear that Bobby considers his company a business-to-business organization. It operates in the B2B world because its solutions require partnerships with a vast number of other organizations that facilitate loan restructuring and repayment.
Businesses are often just as clueless as borrowers that programs are available for loan repayment. Student loan contributions from employers are tax-deductible at up to $5,250 per year, yet participation in this program is astoundingly low. When companies realize they can provide this option at little to no cost to the company, they’re on board.
Much of the motivation comes down to automation. When so many aspects of loan resolution can be automated, everyone benefits. Even as a business gains from setting up automation and streamlining the repayment process, the borrower discovers a cohesive understanding of their debt due to the holistic nature of the process.
Common Obstacles to Debt Management
Regulatory uncertainty is a common obstacle in the student debt world. The average person doesn’t understand the government’s involvement in student loans and worries that they might be violating some unknown regulation at any time.
Lenders and servicers benefit from this uncertainty, even while also experiencing it themselves. As they try to avoid ending up in legal hot water, they barrage their borrowers with financial jargon and scary numbers.
Timing is another challenge. Repayment resumption is on the horizon in the U.S. after a period of emergency COVID-19 relief. Millions of people have a vague notion of a deadline looming somewhere in the future - an upcoming payment due, a rise in the monthly payment amount, a total loan payoff date that still feels like it’s a thousand years away.
This leads to hopelessness about ever resolving student loan debt, which disengages people from the process. After they reach this point of resignation, it’s difficult to re-engage them with managing their student loans proactively. PayItOff provides a ray of hope.
One of the most effective ways Bobby and his company reach people who are feeling tuned out is through their employers. When an employer offers student debt relief in the same breath as a 401K, it legitimizes the entire experience.
Maybe those student loans are manageable after all!
This article was originally published on July 6, 2022. All content © 2022 by Digital Growth Institute and may not be reproduced by any means without permission.