In a Nutshell: In today’s professional job market, a college degree is all but mandatory, and, for many young professionals, student loan debt is also a fact of life. But ChangEd, an app designed to help borrowers pay debt down with their spare change, is showing people with student debt the light at the end of the tunnel. The app links to spending accounts, and purchases are rounded up to the nearest dollar with the difference deposited to a ChangEd account. Once the balance in that account reaches $100, it’s used to make additional payments on student loans. ChangEd illustrates to users how much money those extra payments will save them over the life of their loan, which adds a healthy dose of optimism to what can otherwise seem like a heavy financial burden.
Dan Stelmach is one of those rare individuals who managed to balance full-time work and his studies during college. He graduated, kept his sales job, and, after a few years, began looking into a buying a house. The problem was that he’d taken out $70,000 worth of student loans to pay for school, and he knew he couldn’t afford a mortgage in addition to his monthly loan payments. Like most of his friends and family who carried student debt, he had no game plan for getting out from under the debt faster.
So Stelmach and his older brother, Nick, brainstormed a solution. In late 2016, they began working on an app called ChangEd to help users pay off their student loans faster. They launched a beta in 2017, testing the product with about 1,700 users. Later that year, Stelmach and his team got the break all developers dream of — ChangEd appeared on the front page of the Apple app store.
“We had millions of impressions and thousands of downloads. Out of nowhere, we had to get out of our testing phase and get into a real product,” said Stelmach, Co-Founder of ChangEd. “That was the signal that people need help with their student loans.”
ChangEd is designed to help users save money by paying down student debt at an accelerated rate. The app links to the user’s spending accounts — including banks and credit cards — and rounds each transaction up to the nearest dollar. The difference is set aside in a ChangEd account and used to make a student loan payment each time the account balance reaches $100.
“We sent over $100,000 in student loan payments within our first few months,” Stelmach said. “This year, it’s been a huge snowball. We’ve sent over $1 million in the last six months, and we send close to $250,000 every month now — and that number keeps growing month over month.”
ChangEd is free to download and charges users $1 per month to contribute to the company’s operating costs. For a mere $12 a year, the app can potentially save users thousands of dollars in interest on their loans. The app also has a $10 per day limit on change roundups, in case users go on a spending spree.
“We’ve been up for just over a year and a half now, and some of our users have already saved almost $2,000 with their spare change,” Stelmach said.
Changing Attitudes Toward Repaying Student Loans
Despite their apparent financial drawbacks, student loans are still a strong investment. Although graduates may leave school with tens of thousands of dollars of debt, or more, that debt pays off in the long run. Stelmach said that the average college graduate makes $2.5 million more than a non-college graduate. The difficulty lies in those first few years after leaving school, when graduates are finding jobs and building careers while living with significant debt.
“Student loans are a sour subject, but we’re getting people excited to make loan payments with our app,” Stelmach said.
Paying off loans faster means long-term savings, but people often assume putting more money toward payments means living lean in the short term. The ChangEd app proves that proactively tackling debt doesn’t mean putting your budget in a vise grip. The app’s purpose is to decrease the impact of additional loan payments.
“It’s something that doesn’t have to change someone’s lifestyle drastically,” Stelmach said. “People want to pay down their debt, but there’s always a struggle of adjusting your lifestyle and setting up a strict budget — it takes a lot of time, determination, and encouragement. We try to make it as low-touch as possible, so you don’t feel small transfers coming out of your day-to-day living expenses.”
ChangEd strives to have a positive effect on making student loan payments. Rather than letting debt repayment remain a depressing surrender of borrowers’ hard-earned dollars, the app gives users a well-deserved morale boost.
“There’s no encouragement or a pat on the back for debt repayment. If you went onto your student loan servicer’s website and you paid an extra $100 on your $50,000 loan, all you’d see is $49,900 plus whatever interest charges are there,” Stelmach said. “Our app shows, on every single payment you make, how much time and money you’re saving if you stick with it.”
ChangEd’s projections are based on user payment history and habits. They also put interest accrual and savings into perspective by showing the positive impact additional payments can have. By illustrating how much users save over the long term when they dedicate spare change to paying off debt, ChangEd brings some much-needed positive reinforcement to the realm of repayment.
“These extra dollars you’re using today are going to make a difference tomorrow, and we try to show that within our app,” Stelmach said. “That’s the most compelling thing we offer our users — encouragement that you don’t get anywhere else.”
Features Help Borrowers Achieve Financial Stability
Student loan debt is a unique type of debt because people take it on to better their lives and earning potential. It can also involve more family members than other types of debt, as parents often cosign for their children’s’ loans.
For that reason, ChangEd supports collaborative repayment. Family members and spouses can sign up under their own names and link their account to their loved one’s student loan. The ChangEd experience is precisely the same for them as it is for the borrower; their transactions will be rounded up, and the difference goes toward paying down the debt. With multiple people contributing, the loan can be repaid even faster.
Other expense accounts, including credit cards, can also link to ChangEd. ChangEd does not bill the credit card; it only reads the transaction data to coordinate small transfers from the linked bank account.
Users carrying multiple student loans can target specific loans they want to pay off faster. They can choose the loan with the highest interest rate, the highest or lowest balance, or whichever criteria they wish to prioritize.
“We are serious about security. We deal with people’s money, so we use bank-level encryption. We have FDIC-insured accounts to verify loan information. I’m a user of the app myself. I have student loans. I want to know where my money’s going and how that money’s being held securely.” — Dan Stelmach Co-Founder of ChangEd
“With some service providers, we have that ability. We have seen success stories where someone has tackled at least one or two of their smaller loans as they’re tackling larger ones,” Stelmach said.
ChangEd stores user information in secure databases, accessing it only for account setup and payments. Financial information is protected with an even higher level of security.
“We are serious about security. We deal with people’s money, so we use bank-level encryption. We have FDIC-insured accounts to verify loan information,” Stelmach said. “I’m a user of the app myself. I have student loans. I want to know where my money’s going and how that money’s being held securely.”
Users Can Save Thousands of Dollars and Years of Payments
ChangEd payments are additional installments on student loans. Users must still keep up with the established monthly payments on their own. Making extra ChangEd payments, in tandem with standard payments, helps users reduce the term of their loan and the interest charged.
“The difference between these additional payments and strict principal payments is that they help achieve a little more savings on principal payments,” Stelmach said. “You still save drastically as long as you stick with your regular monthly payments and have ChangEd add additional payments.”
The savings ChangEd projects for users is based on these additional payments, not strictly on principal payments. The principal is the amount of money borrowed through the loan. Interest on that loan is a percentage charged on the principal not yet paid back, which is how lenders earn a profit.
Depending on user and loan circumstances, ChangEd payments may be used to pay off interest rather than principal. They may also be designated to first pay off late-payment penalties or other charges the borrower may have accrued. But with the interest and extra fees taken care of, regular payments can pay down the principal, thereby reducing future interest accrual and saving the user money.
Through this method, ChangEd can reduce the student debt burden on both an individual and a national scale. The app can also provide recent graduates with some financial breathing room as they begin their professional lives, expanding their ability to positively impact the economy.
New Features Offer More Ways to Pay Down Student Debt
For most young people, going to college is more often an expectation than a choice. A bachelor’s degree has become a prerequisite to finding high paying, skill-oriented positions. In itself, a college degree is a combination of experience and education that attests to the discipline and intelligence necessary to succeed in today’s workforce.
The demand for college-educated workers is unlikely to decrease any time soon, and the same is true of the demand for student loans. To ease the financial burden on current and future borrowers, ChangEd is working on developing and implementing new features that will help graduates pay off debt quickly and efficiently, allowing them to move on with their financial lives.
“We started with rounding up spare change, but we’re coming out with other features that help people save more aggressively if they want to,” Stelmach said. “There are other avenues we can reach. One is making payments on any type of loan. But we’re choosing to stay focused on student loans themselves for now.”
Stelmach said ChangEd is currently developing user-requested features, including one-time deposits, scheduled transfers, and gift options. Instead of getting another sweater for Christmas, ChangEd users can ask their families for help paying down their student debt through gifting. And for those family members, the process will be as quick and easy as the day-to-day use of ChangEd’s basic rounding-up function.
As long as education is a vital component to competitiveness and success in the labor market, help along the road to financial solvency and a debt-free life will be one of the best gifts anyone can give — or receive.