Ever wonder why it is that education seems to be getting so much more expensive at such a faster rate than everything else? Well, so did we. So we started to look into it.
The one thing we saw that made no sense to us was that there was still so much (nay, too much) paper based, manual processes that contributed to excess costs. Whether it was sending and handling physical checks, filling out and mailing paper forms or requiring in-person or over the phone contact, we kept finding more and more waste that we believed could be solved with technology.
They say time is money, and if your physical check takes 4-5 weeks to get to your University and be processed, there is definitely money being wasted. We heard countless stories of physical checks being lost or taking too long, leading to expensive workarounds, late fees and even dropouts. The fact that the outcome of a persons education career was still being determined by administrative overhead seemed disastrous to us, so we decided to do something about it.
We started with 529 accounts because we believe 529 is a fantastic program that compounds real benefits for users, but the lack of digital payment infrastructure meant that it was being heavily underutilized (and often caused problems for student families). Savings in 529 accounts still only account for roughly a third of the total $1.8 trillion in savings in the US earmarked for higher education purposes. The delta often sits in average savings and checking accounts earning dismal returns, particularly when contrasted with the rate of tuition inflation.
Even those that were using 529 accounts weren’t utilizing them to their potential, afraid to use 529 funds for non-tuition expenses because of the hassle in tracking expenses and keeping receipts, as well as the threat of audits, back-taxes and penalties from the IRS as a result of non-compliance (or even just losing receipts!).
We are extremely excited to be building the first payments platform built specifically to help student families manage their 529 payments. We believe this will unlock the power of 529 for millions more families, reduce the administrative costs for the entire ecosystem and create a deflationary impact on education as a result.