Founder and CEO Laurel Taylor said the last few weeks of October saw a rush of employees trying to get documentation to be eligible to have their student loans forgiven under the PSLF.
In the month leading up to Oct. 31, Candidly processed 15% of its historical total of applications. Established under the College Cost Reduction and Access Act of 2007, it allows Direct Loan borrowers who make 120 qualifying monthly payments under a qualifying repayment plan while working for a qualified employer to have the remainder of their loan forgiven.
The program itself is good news. So was a redefinition of eligible payments that made it easier to reach the 120-payment threshold.
PSLF issues contributed added stress
But there were problems. PSLF wasn’t well-promoted. Technology supporting its administration was so last century. Manual processes provided opportunities for errors by employers, employees, and administrators. Some applicants weren’t able to consolidate their loans before applying. Others submitted incomplete documentation. Applications must be faxed and screened at a rate of eight per person per hour.
Enter Candidly, who automates these processes, ensuring applications are accurate and complete.
“Just the ability to address so many of the traditional errors that lead to rejection makes a big difference,” Taylor said.
Many unprepared for student loan payments’ return
Taylor doesn’t get a break, as Candidly is helping many of the 42 million American student loan borrowers prepare to resume payments on their student loans. She said more than 25 million applied for debt relief in the first two weeks. If litigation has not been resolved by June 30, 2023, payments will resume 60 days after that, according to the Department of Education.
That relief has been the subject of political disputes, but it is needed in an even more challenging economic environment.
“In a recessionary inflationary environment, finding $392 In a wallet that they haven’t paid in three years, and now is going to gas, credit cards, and basic living expenses is a challenge,” Taylor said. “And the confusion over if it’s $10,000 or $20,000 of debt forgiveness will be issued.”
That uncertainty makes it hard to plan, she explained. Are borrowers making repayments based on the whole balance? That figure minus $10,000? That figure minus $20,000?
Driving awareness, education are key
Candidly is focused on helping users return to making payments while lowering their monthly costs based on their income. That is thanks to, stop us if you’ve heard this before, available debt reduction programs that are poorly publicized and cumbersome to administer.
Most users need to be made aware that income-driven repayment programs are available. Others have unsuccessfully tried to complete them on their own. That’s where Candidly helps them find the right option. Six minutes of effort saves the average user $358 per month.
Users share their goals and answer a few questions during those six minutes. They connect to Candidly’s platform, which proposes three core actions from three million unique combinations of solutions.
Taylor said that candidly takes a broad view of financial wellness and employs behavioral economics. That couples action with insight to provide more personalized and accurate service. For some, that’s PSLF enrollment; for others, it’s joining an income-driven repayment plan. Rounding up purchases each month and putting that on a student loan principal contributes an average of $45 while shaving four years off the repayment schedule.
Americans struggling on several fronts
Taylor worries about American workers, who are contending with a hyper-competitive labor market and extraordinary inflation. Now many are faced with having to make payments on student loans. BNPL-related defaults are rising. As corporate expenses increase, more layoffs are likely.
“As we think about the needs of our American workforce, the need to create cash flow and savings has never been higher,” Taylor said. “The number one financial shock is student loan moratoriums, in terms of changes in conditions of liabilities that Americans are managing. I think it’s a sobering time in terms of what the data show us of the financial state of American workers.”
After graduating from Texas State and MIT, Taylor worked at Google in global business leadership. She was also repaying student loans and making mistakes she didn’t want others to repeat. Focused on repaying her student debt, Taylor delayed saving for retirement, losing the maximum benefits from compound interest.
She understands the sentiment to tackle debt, but it doesn’t have to be either/or. Both may be possible through awareness of debt relief programs and savings strategies like monthly top-ups.
More people are getting help
The message is getting out. Half of the total volume Candidly has processed in its history has come over the past month, with borrowers saving $182 million.
“These users, on average, have worked with an employer for seven years and never applied for PSLF,” Taylor said. “So it’s a lack of awareness or a difficulty in moving through the application process.”
Candidly employs certified coaches with specific training in addressing student loan debt. It’s a free workplace benefit. Following a call, borrowers report an average 84% increase in confidence. Seven of every eight recent calls were about PSLF, with 80% receiving guidance on additional issues.
“Sometimes, users need to go through consolidation. Or they can benefit from switching to a different income-driven repayment plan versus the internal repayment plan,” Taylor said.
Tony Zerucha is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.