Free Visual Software Tool by Fidelity Investments’ Fidelity Labs Shows Student Loan Repayment Options
Posted By Donna Fuscaldo on June 22, 2016 at 11:59 am
The student loan debt problem has become huge, negatively impacting everything from purchasing a home to saving for retirement. The outsized debt, which stands at more than $1.3 trillion, has even spurred a crop of start-ups, which do everything from helping borrowers get a handle on their disparate loans to helping them refinance their debt.
But the start-up industry is about to get more crowded, and it has Fidelity Investments’ Fidelity Labs to thank. On Tuesday, the research-and-incubator arm of the investment giant launched efforts to help customers and non-customers alike get a handle on their student loan debt.
“We are really trying to go where the problems are, and we know this is a huge problem,” Asha Srikantiah, director, Design Thinking and Innovation at Fidelity Investments, said in an interview with Goodcall.com. “We’ve seen time and time again student loans are impacting people in really significant ways.”
Blame it on the ever-skyrocketing cost of a college education or the wrong choice of major on the student’s part. Either way, countless people leave college with tons of student loan debt. Those who graduate with a degree often face situations where they remain unemployed or underemployed, hindering their ability to pay off their debt.
For those who don’t graduate but still must repay student loans, the problem is even worse. Even among people who are employed, student loan debt can prevent them from buying homes, getting married, starting families and saving for their most costly bill: retirement.
Student loan debt impacts a large portion of the U.S. workforce
Consider this nugget from a recent Fidelity customer survey: One of every three members in a Fidelity workplace retirement plan has student loan debt. Of those, 80 percent say it impacts their ability to save for retirement, while two-thirds—because of student loans—changed their retirement plan by lowering or stopping contributions or by taking loans or hardship withdrawals. Two-thirds of respondents also said it affects saving for a home or paying for daily items.
None of this is surprising. According to the Wall Street Journal, the average student loan debt for a college graduate in 2015 is $35,000.
Enter Fidelity Labs, which built a suite of software dubbed Fidelity Labs Student Debt Tool that helps people with student loans wrap their heads around what can be a complicated picture and then provides choices in terms of how to contend with their debt. Visitors to the free tool, currently in beta testing, can either manually input their student loan debt information or, for federal loan borrowers, use the government’s National Student Loan Data System—a database of all federal loans whether a borrower knows he or she has them or not.
Once the loan information is inputted in the tool, Fidelity Labs asks users a series of quick questions and based on calculations shows people how much they owe and what they would have to pay back based on different repayment options, whether it means taking advantage of a government loan forgiveness program or refinancing with a private lender. The tool will even calculate how soon the loan can paid off by making additional payments. “We’re not telling people what their options are, we are actually showing people what each option looks like,” Srikantiah says. “People need to see the numbers in their choices.”
Fidelity Labs explains its motivation
Fidelity Labs has partnered with two student loan lenders: SoFi and Citizens Bank to provide refinancing terms if a user wants to see what their private lender option is. Srikantiah says the partnership is not monetary, and both lenders were vetted before being included in the Fidelity Labs tool. “They are not paying us, and we are not paying them,” she says. “Fidelity has a vetting process to ensure high standards of customer service, data security and financial stability.”
Fidelity Labs is just getting started in the student loan debt space with this tool and others yet to be launched, becoming a direct competitor to a handful of the start-ups that have emerged to help people get a grip on their student loan debt. But unlike start-ups that have to make money or deal with the wrath of investors, Fidelity Labs hasn’t thought about how it will make money largely because it has the backing of Fidelity Investments. “We’re lucky at Fidelity Labs because we can launch something like this because we know it is the right thing to do,” Srikantiah says. “A lot of people face staggering student loan debt and need help figuring it out and sorting out their options.”