FinTech Meets College Savings: How technology is helping to address the $1.7 Trillion in Federal Student Loan Debt

Posted on March 15, 2021
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FinTech Meets College Savings: How technology is helping to address the $1.7 Trillion in Federal Student Loan Debt

We were honored to host David Adefeso, Founder and CEO of Sootchy alongside Sootchy COO, Emma Willis, as part of our #VCLunchNLearn program this month. Adefeso shared his personal experience with student loan debt, and what he’s doing to make sure it becomes a thing of the past through Sootchy.

At 21 years old Adefeso boarded an airplane to New York. He had $250 in cash, no friends and no job. That money didn’t last, and at one point, he found himself experiencing homelessness. But he worked hard (sometimes having three jobs), and earned his way into Harvard’s MBA program. Unfortunately, after graduating, David faced the shock that millions of Americans know all too well: $125,800 in student loan debt.

He was only able to pay that debt off after working tenaciously to obtain a Wall Street investment banking job. On Wall Street, he advised some of the world’s largest companies on multi-billion dollar mergers, acquisitions and financing. But he never forgot the struggle to pay off his student loan. In fact, it’s what drove him to create the Sootchy app: helping other people avoid the burden of student loans.

On average, tuition tends to increase about 8% per year, and that means the cost of college doubles every nine years. So, by the time a child graduates high school, the cost of tuition will have doubled twice. It’s no wonder that the US is currently sitting at 1.7 trillion dollars in student loan debt. This financial crisis has and will continue to have an impact on generations of Americans. Currently, 44.7 million people in the US have student loan debt. It particularly affects our most vulnerable populations, and widens the gap in education and wealth that exists in our country. So what is the answer to this far-reaching problem?

The experts at Sootchy believe the solution lies in 529 College Savings Accounts. If you’ve haven’t heard of these hidden gems of college savings, don’t feel bad – you’re not the only one. Recent studies show less than 30% of Americans know what a 529 Plan is, and only 13% use them because they have traditionally been difficult to set up and manage. These accounts are designed to help individuals save for college by allowing them to grow without accruing taxes. Additionally, many states offer tax credits or deductions for funds that are contributed to the accounts. But the benefits don’t stop there. Another reason 529 accounts are so great is that they can be used for a variety of education options from trade school to traditional four-year universities. Unfortunately, they’ve typically been time-consuming to open and intimidating for those who aren’t familiar with financial planning.

In the past, these accounts were opened with stacks of forms to complete, and people were left to choose from many plans without any support. Not any more. When Adefeso had the idea for creating Sootchy, it was based on using his background in finance and knowledge of 529 Plans. He knew what it took to open them and saw an opportunity to make these plans easier to open using technology, and more approachable with financial guidance.

Sootchy is now on a mission to eradicate student loan debt, and is starting a movement to spread the word about 529 Plans, the powerhouse of college savings. The goal is to help everyone afford higher education in the hopes of turning the tide on generational debt. With information on tax benefits, education options covered by 529 Plans and state-by-state guidelines, Sootchy helps individuals become more informed and provides gifting options to get family and friends involved in saving for a child’s future education expenses. The Sootchy app is now available on Google Play and the App Store. You just need the code DEBTFREE to start your own account.

Huge thanks to David Adefeso and Emma Willis of Sootchy for joining us at #VCLunchNLearn, and for recapping our session! Be sure to watch the recorded session to learn more about Sootchy’s work, and sign up for the VC Newsletter to get the heads-up on our future events and programs!