Daniel Stelmach and Nick Skrzyniarz hope their ChangEd app will help solve the student debt crisis. With over $1.3 TRILLION in student debt, many economists think student loans will be the next financial bubble. For students carrying debt, the crisis is real. It often takes twenty years to pay off college loans and it affects people's financial lives well after graduation. Stelmach and Skrzyniarz think they have a solution.
The ChangEd app takes spare change and uses it to pay down the principle on student loans. When you link your debit card or credit card to the app, whenever you buy something, it rounds up the purchase to the nearest dollar and places the “change” into your ChangEd account. Once you have $100 in the ChangEd account, the company pays down the principle on your student loan. You still need to make regular payments, but paying the principle down faster can save tens of thousands of dollars over the life of the loan.
So far, the ChangEd app only works with bank-issued credit cards. They have about 80% of US banks online and they're adding more daily. They make their money by charging a $1 per month fee for their services. So far, users like what they're getting with the ChangEd app, it has a 4.5 star (out of five) rating on the Apple app store. The concept is similar to Acorns, the first “spare change” app to hit the market a few years ago. Acorns uses spare change to create a stock and investment portfolio.
The guys likely want a Shark to help them with the “back office” stuff like getting relationships with banks and credit card companies. We'll see if a Shark wants to help change the face of the student loan crisis in episode 918.
My Take on The ChangEd app
I remember when my ex-wife was pregnant with our first child. We had a “baby jar” we put all our spare change in during her pregnancy. Over the course of nine months, we squirreled away about seven hundred bucks. We used it to buy baby stuff, cribs, changing table, etc. The ChangEd app works in the same way.
There seems to be an app for everything these days. I'm not a big app user and I have no student loans, so I'm not a ChangEd customer. I read through some of the reviews on the app store and it seems the people using it are happy. Debt, student or otherwise, is a daunting thing. It creates a lot of anxiety for a lot of people. Anything that helps pay it faster is a good thing. Unlike a change jar, they make sure the loan gets paid. There's no temptation to use the change for beer money. I may not be a user, but I am a fan. I'm in.
Will Sharks Share some of their Change?
This is a straight up valuation play. Whether a Shark is interested or not will be determined by the number of users running the ChangEd app. As a purely transactional business, this would be attractive to Mr. Wonderful, but he isn't on tonight' panel. The other Sharks will have to pick up the slack.
Users, churn rate, rate of acquisition and customer acquisition costs are the things Daniel and Nick need to talk about. If they come in with an “I want to change the world” attitude and don't back it up with hard numbers, it will be a rough swim in the Tank. I don't think that'll happen though. Everything I've read about these guys leads me to believe they're the real deal.
The objection they may face is that anyone could create a similar app. Acorns started in 2014 and now there are dozens of “spare change” apps for investing. Who's to say the same won't happen for student loans? What they ave going for them is their platform. If they can demonstrate they can do the same for car loans, mortgages, etc, they could garner more interest. I look for Cuban and A-Rod to make bids, I don't think Barbara, Robert or Lori will be in on this one.