An app that helps students pay student loans using spare change won the University of Chicago’s College New Venture Challenge on Thursday.
CommonCents, cofounded by UChicago fourth years Maggi Heneghan, Madeleine Barr, and Reshad Monsur, connects users’ bank accounts with their student loan accounts. On every debit card transaction, it rounds up to the nearest dollar and puts the spare change toward student loan payments, particularly cutting down on accrued interest. The team won $15,000 at the College NVC.
Three other startups were named runners up and won $5,000 each: Finalyze, a platform that uses machine learning to glean actionable insights from financial documents for hedge fund managers; MealFlour, a social enterprise creating jobs and fighting malnutrition through flour made from meal worms; and StoryArts, a summer arts program for students on the mid-South Side of Chicago.
This is the fourth year of the College New Venture Challenge, which is a competition only open to UChicago undergraduate students, and in presenting the awards, judges said student startups were the most developed they’ve seen yet.
An app that uses your pennies to pay loans
The student loan debt statistics grow more staggering every year: this year seven out of ten grads had to borrow money for their education, and the average student took out over $37,000 in debt.
What’s particularly damaging about this increase in student loans, the CommonCents team explained in their presentation, is how quickly interest can add up, how little students understand about that interest, and how easy it is to mitigate that extra cost.
For example, if the average student has $35,000 in loans, by the time they finish paying off their loans that cost jumps to $57,000 due to accrued interest. But if they contribute $1.33 per day toward that interest students can cut their repayment period from 13 years to eight years, and decrease their final cost by almost $20,000.
With this in mind, CommonCents connects to users debit accounts and contributes the “spare change” of every transaction toward paying student loans (for example: if a Starbucks coffee costs $2.34, 64 cents will go toward the daily goal of $1.33). The app shows the amount of money a user currently has in the bank, how much they’ve saved in interest by making micropayments, and how close they are to their daily goal. In addition, it connects to other financial accounts such as Venmo and PayPal, allowing users to contribute other extra money directly to their student loans if they so choose.
“We want something that’s happening over time in the background…but is making a huge difference on our student loan balance,” said Barr.
There are features in the works to refer parents or grandparents to the app so their spare change can be put toward the loan payments as well.
CommonCents plan on making money through referrals to refinancing companies, as well as patenting their API which streamlines the connection between banks, PayPal, Venmo, and other financial accounts, and student loan repayment providers. In the future, as they onboard users, they hope to make money off user data and referrals to other complementary services besides refinancing.
The team is launching their beta app this summer, with a free iOS and Android app roll out slated for September. All three team members are working full time on the app after graduation, and will take part in the Polsky Summer Accelerator to grow their startup this summer.