TIAA tackles student debt with startup Savi

TIAA announced Monday it has teamed up with fintech startup Savi to help financial planners and clients navigate the second-highest consumer debt facing the nation: student loans. 

The amount of outstanding student loan debt in the U.S. has reached $1.6 trillion this year, according to Educationdata.org, owed by 44.7 million borrowers. Student loan debt ranks second to mortgage debt surpassing the amount of auto loan and credit card debt.

TIAA and Savi launched a student debt tech tool targeted to help an organizations’ employees reduce their monthly student loan payments and to qualify for the federal Public Service Loan Forgiveness program, the company noted. 

“Historically, the PSLF program has presented challenges for some borrowers due to difficulty understanding the rules and managing the paperwork,” according to a company statement. In fact, 99% of program applicants have been rejected for not meeting program requirements or due to missing or incomplete information on a form, according to data from the U.S. Government Accountability Office.

Financial planners, institutions and individuals can leverage the tool without any IT involvement required. Clients sign up by answering a few questions and from there the Savi software will determine an income-driven repayment plan and whether the client may qualify for the loan forgiveness program. Savi’s algorithm takes into account an individual’s specific circumstances, including their family and tax situation.

TIAA, which boasts $1.1 trillion in assets under management as of March 31, conducted a pilot with the three-year-old startup from July 2019 through March with seven nonprofit institutions, four in higher education and three in healthcare. During the pilot phase, employees that signed up saved an average of $1,700 a year in student debt payments and had an average projected forgiveness of more than $50,000 upon successful completion of 120 months in the PSLF program.

The total projected forgiveness from the pilot exceeds $53 million to date, according to TIAA.

University of Pittsburgh, for one, adopted the solution in March, said John Kozar, the university's assistant vice chancellor of human resources. "In a very short period of time, participants have a calculated average loan forgiveness exceeding $55,000," he said. "There is also an immediate savings with the reduction in loan repayments that are averaging $100 per month. Among our participants, the total debt that may be forgiven exceeds $14 million."

Even the most diligent student loan borrowers face challenges navigating the "confusing maze of federal student loan repayment and forgiveness options," said Aaron Smith, Savi co-founder. “After seeing the impact during our pilot with TIAA, we are excited to expand to the broader TIAA community of client institutions and their employees.”