Goodly, a three-year-old, San Francisco-based startup, has been steadily building its business with a five-person team and not much funding -- $1.5 million secured in 2019 and, more recently, an undisclosed amount of funding from Beth Axelrod, a longtime HR exec and the global head of employee experience at Airbnb.
The startup, which aims to make it dead simple for companies to offer tax-free student loan repayment as an employee benefit, is profitable. It has exclusive relationships with numerous brokers, including insurer NFP and the much larger Willis Towers Watson. Still, its product wasn't exactly top of mind during the pandemic, when enterprises became consumed with remote work and trying to ensure their employees' mental well-being.
Sailing into 2022, that could be changing for two reasons. One ties to a provision within the Consolidated Appropriations Act of 2021 that allows employers to contribute up to an annual maximum of $5,250 per employee to repay student debt. Those contributions from the company are tax deductible for employers but also are excluded from taxable income for employees, which will seemingly give companies a much larger financial incentive to provide them.
Second, after more than 20 months of temporary student loan forbearance for millions of student loan borrowers, student loan relief is ending on January 31, which means that beginning in February, federal loan payments will resume with their normal (and normally onerous) interest rates. That means an issue that has been shelved for some time will suddenly jump to the forefront, and in a competitive job market, companies would probably be wise to take note.
Certainly, Goodly CEO Gregory Poulin -- who was among the earliest employees at Parker Conrad's Rippling, along with co-founder and CTO Hemant Verma -- has a compelling pitch should they decide to investigate further. As Poulin told us earlier this week, while $5,250 may not seem like much, it can add up in surprising ways over time.
"For the average company that we work with, we usually see around $100 per participant per month being the most common contribution," he says, comparing the cost to a cup of coffee per day. But taking that employer contribution and applying it as a payment directly to the principal of student loan also helps address the issue of compounding interest over the lifetime of the loan, which is where people really get into trouble.
Poulin says the typical repayment period is about 10 years and that Goodly can reduce that repayment period by three to four years depending on the outstanding balance of an employee's loan. That doesn't square exactly with the data that we're seeing and which shows that repayment periods actually average closer to 20 years, but obviously if Goodly can help someone save even a year of loan payments, that's something employers can use as a sweetener.
For what it's worth, the startup's tech is fairly straightforward. Each user of Goodly is given their own account, where they can manage and track their student loans from its dashboard. From there, employees can also access content like financial wellness counseling, or the best strategies for optimizing repayments.
Poulin adds that one especially popular feature is the ability for employees to invite their friends or family to make a contribution toward their student loans that functions in a similar way to crowdfunding, wherein a parent or grandparent can make a one-time or a recurring contribution. "And of course, that contributor has peace of mind in knowing that payment is being directed to that student loan and not spent on anything else," he says.
Goodly passed through Y Combinator shortly after its launch in 2018. Poulin says he was inspired to launch the business after the sudden death of his own father while he was a student at Dartmouth, after which he found himself having to borrow $80,000 in student loans.
Years later, he says his payment is still more than $900 a month.
He has a lot of company, unfortunately. As of last year, there were 45 million borrowers who collectively owed nearly $1.6 trillion in student loan debt in the U.S., and for too many of them, it can become crushing. "It really creates a two-tiered workplace where those with student loans are in a lot of ways, second-class citizens," says Poulin, "because by the age of 30, people with student debt hold about half the retirement savings of their peers without student loans," causing them to delay homeownership, getting married and having children.
If Goodly has its way, when student debt regains mindshare in 2022, more employers will begin to recognize the issue -- and do more to help their employees mitigate the cycle.
Pictured above, left to right: CEO Gregory Poulin and his co-founder and Goodly's CTO, Hemant Verma.