A new startup named Pillar, which aims to help students pay down loan debt, recently received $5.5 million in seed money from Kleiner Perkins, according to a report.
The app will connect with the loan provider and a person’s bank, and can then communicate with the borrower and offer advice based on income, spending and loan size. If the app can find a way to pay down the loan faster, it will let the person know through a mobile phone alert.
Michael Bloch, one of the co-founders of the startup, was an early employee of DoorDash. He said the idea for Pillar came to him when his wife graduated from a law school with debt upwards of $300,000.
“We struggled to figure out the right way to pay them back,” he said. “We read blog posts and articles. We made spreadsheets. We even talked to a financial advisor. But there really was no easy way for us to figure out what was the right thing for us to do. And I realized there are 45 million people with loans, and millions of those people have had the exact same experience as I did.”
Bloch was going to Stanford Business School at the time, and decided to drop out and focus on building Pillar with Co-founder and CTO Gilad Kahala.
Student loans are the second largest type of consumer debt in America, with 45 million borrowers owing upwards of $1.5 trillion. For every 10 people who attend college, seven of them take out loans and end up owing an average of $36,000, which takes about 20 years to pay off. People with more debt, around $60,000, can take up to 30 years to pay it off. Also, 20 percent of all borrowers owe upwards of $100,000.
The debt affects women more than men, for two reasons. One is that more women attend college than men, and the second is the pay gap between those two genders.
Bloch said he wants to simplify the repayment process and help people, even if it’s just in a small way, to start taking control of their debt.
“What we found is these small actions that people can take – where it’s not necessarily a hundred dollars this month. Even making a $5 a week extra payment can make a really big difference to somebody’s financial life in the long run,” he said.