Companies have finally woken up to a huge and potentially profitable market: Student borrowers.
Gradifi, a Boston-based startup that works with employers who pay down a portion of their employees’ student loans, and Radius, an online-focused bank, announced Tuesday that they’re partnering to offer a debit card that will give users 1% back on all of their purchases toward their student loan. The card will be available this fall. In a separate announcement Tuesday, Fidelity Labs, an in-house incubator at Fidelity Investments, unveiled the pilot version of a student loan help tool they’re developing.
The offerings come as student debt is increasingly becoming a universal American experience — roughly 70% of bachelor’s degree recipients graduate with a student loan. What’s more, as the cost of college pushes more parents and grandparents to take on loans to help their children finance school, Americans are wrestling with education debt during their golden years. And companies want to tap into this growing demographic.
“There’s definitely a market for trying to help people manage their student debt, ” said Mark Huelsman, a senior policy analyst at Demos, a left-leaning think tank. “As long as we don’t deal with this on a policy level you’re bound to see more financial institutions and other companies use student debt as a hook get customers.”
Gradifi first launched its platform — which allows employers to securely put money toward their workers’ student loans — in September. So far, more than 400 companies have contacted the firm about setting up student loan repayment programs for their workers, according to the company’s chief executive, Tim DeMello. DeMello and other company officials realized that their platform doesn’t just interest employers. “Brands are really interested in this audience, ” DeMello said.Gradifi/Radius The Gradifi/Radius debit card.