The amount of outstanding student loans in this country numbers a staggering $1.4T (Trillion with a T). This has the potential to be a very large problem. At the same time, competition amongst employers for top talent is fierce. Employers need ways to differentiate themselves; especially when targeting potential millenial employees. Tuition.io, has shrewdly devised a platform to bridge these two items. Its SaaS platform for employers provides student loan repayment as a job benefit. Employers on the platform such as Live Nation, Staples and Fidelity are able to create customized benefits to pay down an employees loans that can be tailored by term, seniority, amount, milestones, business unit, etc.
LA TechWatch chatted with CEO Scott Thompson about the company and its latest round of funding.
Who were your investors and how much did you raise?
We just announced our Series B round which was led by Wildcat Venture Partners with participation from existing investors Mohr Davidow Ventures and MassMutual Ventures LLC, the corporate venture capital arm of Massachusetts Mutual Life Insurance Company. To date, Tuition.io has raised a total of $15.2 million in funding.
Tell us about your product or service.
Tuition.io is the nation’s leading employee benefit platform empowering employers to better attract, retain and engage their next generation of talent who are saddled with stifling student debt, by helping their employees reduce and better manage their student loan burden. As the first provider to bring employer student loan contributions to market at scale, the award-winning company is managing more than $2 billion in outstanding loans on its secure platform. Tuition.io works with companies of all sizes, from Fortune 500 companies such as Live Nation, Fidelity and Staples, to startups including ChowNow and Chegg, as well as public entities such as the City of Memphis. Tuition.io is on a mission to provide an impactful solution for employers and employees across the country.
What inspired the company?
The original founders had the goal of creating a consumer-facing platform to help ease the burden of student loans, after graduating with copious amounts of student debt themselves. They saw student debt as an intense burden for any new college grad to face, let alone during the height of the recession, and thus wanted to make a real impact to help graduates like themselves easily manage and pay down their debt. We pivoted to a B2B model in 2015.
How is it different?
Tuition.io was not only the first but remains the most complete student debt relief solution available on the market. We customize our platform for companies and then manage the technology end-to-end for participating employers and employees. The platform provides a host of in-depth, technology-based tools helping borrowers manage their loans while emphasizing engagement and ﬁnancial literacy.
More than 44M Americans currently hold a total of $1.4T in outstanding student loan debt and that number is growing at a rate of $2,726 per second. Employers have been quick to notice this unique benefit as it impacts multiple generations of employees from millennials to baby boomers across the U.S. workforce. In fact, the number of companies expected to adopt student loan repayment programs is expected to jump to 26% in 2018, up from 4% in 2015.
The great thing about this benefit is that it’s applicable across the board to various industries and companies, especially any company that utilizes the millennial workforce. Millennials currently make up a third of the American workforce, and that number is quickly rising. Never before has such a large percentage of the workforce been burdened with levels of debt from their education, which has a direct impact on their ability to pay their bills, save for retirement, and stay in the jobs they love. According to a recent report, student debt is delaying millennial homeownership by seven years. Around 85% of respondents said they have not been able to save for a down payment because of their student loans.
What’s your business model?
Tuition.io is a large enterprise SaaS provider within the Employee Benefits market. Tuition.io customizes its platform for companies, and then manages the technology for employers and employees that sign on. The employer chooses a customizable program and contribution amount. Employers can contribute a fixed amount on a monthly or yearly basis and can opt to increase after select milestones. They can also offer the benefit in a highly targeted way (think tenure, business unit, and so forth), or to their whole team, as an inclusive way to increase employee engagement. They have complete control of their program.
Why are employers interested in offering this as a benefit to their employees?
Competition for top talent is an ongoing issue for employers and getting more and more cut throat. Employers are looking for opportunities to stand out and are noticing that traditional benefits don’t resonate with the large millennial segment of the workforce. While student loan repayment assistance is a relatively new benefit, the early results point to a significant increase in retention. 86% of employees say they’d stay with a company at least five years if their employer helped pay down their student loans.
Trailblazers such as LA-based Live Nation, Staples and Fidelity now provide student loan assistance are experiencing strong participation rates and positive feedback from employees and HR professionals alike.
What was the funding process like?
The markets for capital for early stage start-ups have tightened considerably over the last 12-18 months. Venture investors are looking for clearly disruptive business models, proof points that the concept is working and clear understanding of the use(s) of new capital. While this added some time to our capital raise efforts, the company was able to showcase its market leadership, clear business/financial model and accelerating market conditions, thus allowing us to complete our Series B fund raise on favorable terms.
What are the biggest challenges that you faced while raising capital?
We went through fundraising in a tough VC market, but fortunately we have great investors who support our mission and efforts to help global companies stay competitive in the increasingly aggressive race to hire and retain top talent.
What factors about your business led your investors to write the check?
Our investors understand the market need and believe in Tuition.io’s value proposition to our partners and their employees. Our company is changing the face of employee benefits while helping address a national crisis that is only slated to get worse.
What are the milestones you plan to achieve in the next six months?
We expect to see rapid adoption of our benefit by the large employer market and correspondingly increasing share of that market is serviced by the Tuition.io platform. Further, all key financial metrics should continue to scale aggressively, highlighted by our recurring revenue growing by more than 500% annually the next 2-3 years. We also just opened our Bay Area office in San Mateo and are looking to double our sales and engineering teams.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
In a market that is tight for venture funding, being perfectly clear on how your company intends to actually generate revenues and create positive margin structures over time is imperative. Gone are the days when ‘counting eyeballs’ was all that was necessary to raise venture capital.
Where do you see the company going now over the near term?
We look forward to driving mass adoption until student loan repayment assistance becomes a national and even international employee benefit standard.
What is your favorite restaurant in LA?
Blue Plate Taco on Ocean Ave in Santa Monica. The margaritas alone are worth making the stop.