Pay Off Student Loans With Your Spare Change

This transcript was generated from the episode audio and may contain minor errors.

[Music]

Today's episode is going out on Halloween. I hope you have a wonderful holiday, or I hope you had a good holiday. Went trick-or-treating, ate some candy, whatever it is that you do for Halloween, including possibly nothing. But whatever it was, I hope you enjoyed it. Now, you know what is really scary, okay?

Since it's Halloween, you know the tie-in. Haunted houses are so basic. What's really scary is student loans. Mm-hmm, that's right. In the US, as of 2018, a total of 44 million borrowers now owe a total of over 1.5 trillion in student debt.

That is trillion with a T. Now, surely this spooky problem leads to a number of opportunities, and I don't mean trick-or-treating at the Federal Reserve. In this story, after barely making a dent in student loans after years of repayments, Two Brothers brainstorm solutions for an app that rounds up spare change. This app now has investment from Mark Cuban, more on that in the story, and more than 40,000 users. And by the way, working on this story reminded me, if you have debt like a student loan or a mortgage, making occasional additional payments on your loan's principal can go a long way toward paying off that debt.

Inside us on money is great for that. Just be sure that any extra payments are designated for the loan's principal, not the interest. If you don't know how to do that, your lender can explain how it works. All right, stay tuned for a story. We're calling Pay Off Student Loans with Your Spare Change.

[Music]

A few years ago, brothers Dan Stelmak and Nick Sky were living in Chicago working sales jobs. They graduated from college a few years earlier, and were hoping to pay down their student loans, all while trying to live fun and enjoyable lives. Their story isn't unique. In fact, seven out of 10 graduates in the USA leave college in severe debt. The average loan amount is now around $37,000, which ramps up to 60,000 once interest payments are included over a decade or more.

Serious business. For Dan and Nick, the situation was even more grim. The brothers had over $100,000 in combined debt. And that's after they'd taken significant steps during college to keep the debt low. They'd both worked part-time jobs and had multiple side hustles to help them along.

Still, the number cha-chinged its way into six figures. Once they left college, they started those sales jobs that neither of them particularly enjoyed. But of course, they had to keep working to cover the $850 monthly repayments. One day, Dan started to look at how much longer he'd be paying off the debt. After checking it out, he was shocked.

He'd already been making three years of repayments, but had barely made a dent in the principal, because so far the money he'd paid was mostly for the interest. At that rate, he realized it would take 15 to 20 years to wipe out the debt. Nick took a look at his loan details and found himself in exactly the same position. In fact, their entire social circle was in the same situation. Student debt had become a national epidemic.

They began brainstorming ideas of how to eradicate their loans quickly, and by proxy, everyone else's. Eventually, they settled on something they thought might help. It seemed like a silly idea at first, but the idea was spare change. Yes, really. After turning their pockets inside out and asking their friends via a quick survey, they realized that the average accumulation of spare change was around $50 a month.

They figured if they could devise a simple way of redirecting that excess change to their loans, they'd save not only thousands of dollars in interest, but potentially years of their lives. They liked the idea for a couple of reasons. First, it didn't require any major changes in lifestyle. They could go about things as normal. Second, the whole process could be automated using technology.

They envisioned an app, linked to a user's credit card and bank account, that would round purchases up to the nearest dollar and apply the extra amount directly to a loan payment. For example, if they bought a copy for $3.50, the app would round it up to $4 and put the extra 50 cents toward the loan. With an idea they could take straight to the bank, it was time to take some action. After asking around, the brothers were introduced to Mike, a freelance software developer. Mike helped them work through their idea, introduced the concept of a minimum viable product or MVP, a very basic version of an app with the bare minimum of functions.

With that app, they could run tests with trial users and get feedback. Then with that feedback, they could improve the app and keep repeating. This plan meant they could quickly determine if the idea of scraping off loose change made sense. They were sold. They named their app changed with a capital C and capital E.

A few months later, in January 2017, the first version was ready for beta testers. Now the app needed to have tight security since it linked to users' credit cards and bank accounts. For that reason, it was difficult getting downloads at first. So Dan and Nick tested it directly with their friends and family. Soon enough, word rippled out beyond their direct network to give them just under 100 beta users.

This small group allowed the brothers to pay close attention to each person's user experience without growing too fast. After iterating on the app for a while and making improvements, the brothers were hit with another shock, this one a positive one, a rattling of the piggy bank. Because out of nowhere, Apple showcased the app in their apps we love section. This brought in a major influx of new users and took them from beta testing to full-blown launch with minimal warning. That stroke of luck kept the app growing, which under most circumstances would be a great thing.

However, the guys didn't have enough money to keep updating the app. Dan's initial investment was enough to get it up and going, but wouldn't sustain change for much longer. So after a year of growing the user base, the brothers put in an application to appear on Shark Tank and they were accepted. Through that appearance, Mark Cuban himself offered to invest in the app, seeing its potential. His investment enabled the brothers to quit their full-time jobs and focus unchanged.

Since then, they've introduced a $1 a month user fee, scaled to over 40,000 users, and have helped direct over four and a half million dollars into paying off student loans. Turns out there really is a lot of spare change flying around. Awesome, congratulations to the brothers, Dan and Nick. Now in terms of Apple featuring them and then being able to go on Shark Tank eventually, receive the investment from Mark Cuban, et cetera, some of that is a stroke of good luck, as we called it in the story. But to get into that position in the first place, they had to have the idea, they then had to take action, figuring out how to go from idea to app, build the minimum viable product version of it, do some beta testing, improve it, et cetera.

So basically they positioned themselves to be in a good place to be lucky, which is how I often think about these things. It's like you have a good circumstance that comes along, that's great, what have you done to put yourself in that circumstance? And then what will you do to profit from it? Like how will you then leverage it to get closer to your goals, to grow the business or whatever it is that you're trying to do? So really interesting project.

I love the $1 a month user fee. Also, it's very much aligned with the idea of not taking money from people who are in debt or taking a very small amount of money, $1 a month. But of course, now serving tens of thousands of users a month, it does add up. All right, I hope you have a wonderful Halloween or you had a good Halloween. Inspiration is good, but inspiration combined with action is better.

Today's show notes, including links to change are at sidehustleschool.com/1034, episode 1,034. Thanks so much, my friends. I'll be back again tomorrow. My name is Chris Guillebeau for Side Hustle School. [Music]

From The Onward Project.