When Alison Mathey graduated law school in 2010, she had a 25-year student loan and was $150,000 in debt. So when she heard about TuitionCoin, which offered to refinance her loan to a shorter term and a lower rate, she jumped at the chance.
“I think I’m saving $30,000 over the life of the loan,” said Mathey, a Fairfax, Va., lawyer. “That’s a car, or your kid’s college tuition.”
TuitionCoin’s founder, Eric Smeby, MS Technology Management '05, hopes his startup will be a model that helps reduce this country’s $1.3 trillion in student debt.
His innovative approach links the interest rates he charges to the federal student loan default rate of the school attended. The lower the default rate, the lower the interest. To help ensure loans are repaid, TuitionCoin only refinances loans of those who have graduated and have jobs.
Mathey said the interest on her 15-year loan from TuitionCoin is substantially less than the 7.5 percent she paid on her federal loan.
She called that a “light at the end of the tunnel.”
Smeby (right), 38, of Leesburg, Va., is a software developer for a company that services higher education. He said he was fortunate to not have debt after graduating, and that sparked his commitment to help those who do.
“I’ve been working in higher education for 15 years, and what I was seeing with student loans was destroying a lot of higher education,” Smeby said. “In society, there are a lot of issues with economic disparity. Part of solving that is making sure higher education is accessible to everyone and financed fairly.”
“His core idea is quite innovative,” said J. P. Auffret, director of the Research Partnerships and Grants Initiative in George Mason’s School of Business, and who was director of the school’s executive degree programs when Smeby enrolled. “Eric, like many of our students, has an entrepreneurial spirit. We try to nurture and encourage that inventiveness into the development of new initiatives and commercial ventures.”
Auffret, who is on TuitionCoin’s advisory board, said with Smeby’s understanding of financial planning—his company is licensed in Virginia, and he is registered with the SEC as a financial advisor—“he should do very well.”
Smeby said a computer program he developed calculates the interest he charges. Because Mason’s default rate of 1.8 percent is lowest nationally among public colleges, according to bestcolleges.com, a former Mason student who refinances will pay a lower interest rate than someone from a school with a higher default rate.
Smeby’s next challenge is finding investors. He said he used $100,000 of his own money to refinance two loans to start, and said he has $628,000 of refinance requests waiting to be serviced.
“Every loan is someone I’m helping,” Smeby said. “The question is how many people can we help?”