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When Michael Bloch’s wife graduated from law school with more than $300,000 in student loans, the couple sat down to come up with a plan.
After reading blogs and articles, drafting spreadsheets and consulting a financial advisor, they still didn’t have an answer.
“We really struggled with what is the right way to pay those loans back,” Bloch said. “We found that there is no easy way to figure out what is the right thing for an individual to do.”
The dilemma inspired Bloch to drop out of Stanford Business School, where he would have racked up another $250,000 in student loans, to help others who are confronting the same problem.
About 44.7 million Americans had student loan debt, which totaled $1.47 trillion, at the end of 2018, according to the Federal Reserve Bank of New York.
Today, the company Bloch co-founded, Pillar, is formally launching its platform to consumers, who can sign up via iOS or Android on mobile devices.
Separately, the company also announced it has raised $5.5 million in seed funding. That includes lead investor Kleiner Perkins. Other venture capital investors who participated include Day One Ventures, Financial Venture Studio, Great Oaks VC and Rainfall Ventures.
The platform works to help individuals manage and pay off their student loans.
First, you input your student loan and bank account information. Then, Pillar tracks your income, spending and debt to come up with the best way to pay down your balances.
It will send you push notifications or texts and suggest the best moves to make. For example, if you attend a friend’s wedding one month and your spending is up, the app may tell you just to make your minimum payment. But if you’ve just received a bonus or overtime pay, it will recommend how much to sock away toward those debts.
Based on the experience of initial users of the platform, Pillar estimates that the average person can save $6,200 on their student loans. That can mean reducing their repayments by four years.
“Extra payments could save thousands and thousands of dollars over the life of your loan,” said Bloch, who serves as CEO of the company. “These small actions really have a huge impact on your financial future.”
Pillar’s app is currently free for consumers, although there is a wait list to participate. Users will be on boarded on a first come, first serve basis, according to the company.
The company built its platform with millennial women in mind, as they tend to carry the most debt coming out of college. In the pilot phase, however, Pillar’s users have ranged in age from 22 to 50, including parents who are looking to help their children manage their debts.
The company also plans to add a premium subscription — targeted at $1 per month — that will help debtors through more complicated transactions, such as refinancing or loan forgiveness.
Pillar plans to expand its services to tackle other kinds of debt — including auto loans, credit cards and mortgages. The company plans to begin adding other types of debt early next year.
“The long-term vision of the company is to be an automated debt manager, no matter what type of loans you might have,” Bloch said.