Episode 87: Solving the Student Debt Crisis with Bobby Matson, Founder of Payitoff

Bobby Matson is a University of Michigan grad obsessed with building better infrastructure for all student loan borrowers. Bobby led engineering teams at Carbon Five, where he built technology for Groupon, Fandango, and Stitchfix and shipped software to millions of users.

After codifying student loans and building an algorithm to manage the crushing six-figure student debt he and his wife faced, Bobby, founded Payitoff in 2018. The company offers a suite of innovative tools for financial services and workplace providers to help their customers navigate student loan repayments and achieve better financial outcomes.

To date, Payitoff’s tools have saved student loan borrowers $10.6 million through partner companies, with much more on the horizon. Bobby is proud to lead Payitoff with the philosophy that what’s best for the borrower is always what’s best for business.

Why is Student Loan Debt so High?

The main source of this issue is the fact that the rising cost of tuition at schools and the ability for unlimited borrowing of federal aid to graduate programs. There are a lot of existing programs and student loans that encourage borrowing schools’ tuition and they see no reason for them to lower their prices. The cost of tuition has been skyrocketing over the past 20 years and a lot of that behavior has led to compounding student debt. It affects every generation in America now because you have people that take out loans and still have them from the 90s or even the late 80s. There are also serious interest rates and dozens of repayment options and hundreds of forgiveness programs. When looking at a system that is complex look at all the loans being dispersed. In the past couple of years, you see the loans dispersed and they continue to be dispersed at an increasing rate. This system still stands today and it highly encourages borrowing which isn’t necessarily bad but it’s just the growth of it is fueled by the tuition rates and the amount of money it takes to have that higher education. One of the core issues is that it is hard to determine how much money you are taking out as you are taking it out. People are also not that knowledgeable when it comes to loans. They either do not know it is a loan or see the word federal and assume it is a grant. Likewise, if they do know it is a loan, they still need it to pay for school. Since there is time to pay it off and the main focus of a loan is to get the student to pay for it so they can graduate, they get into a mindset of “we can figure it out later”.

What Happens When Someone Defaults on Their Loan?

This does vary depending on private or federal but about 90% of all student loans are federal. When you default on your student loan and it’s federal, your wages get garnished and after a full cycle, you end up officially in default. There is a process that goes on with you getting transferred to the management system that deals with federal defaults and they’ll garnish your wages and interact with your employer. There are two options which consist of either a direct consolidation that does impact your credit and gets you right back into repayment or there is a program called loan rehabilitation which takes about nine months. This would be like good faith payments towards the loan and then you’re out of default. It is not an easy thing to be in default because it can impact the taxes you owe, your paycheck, and even your social security. The government is essentially your lender.

What Resources Does a Borrower Have if They’re Struggling With Their Ability To Pay Back The Loan?

There are a lot of options that a borrow has when they are struggling to pay back the loan. The default rates are so high because technically every borrower who’s about to default or who is in that scenario qualifies for federal programs where they can pay their payment to their income, so if they’re unemployed at the zero dollar payment that the government subsidizes interest for. Borrowers do leverage their many options and the important thing to note is that borrowers do use their options but it is super complex. That is why you see one in four defaults because it is just so difficult to and historically has been hard to do. because you have to mail in or fax and there is o real digital or electronic way to do this. The issue that most borrows face is the lack of clarity because it is very difficult and even experts find this difficult too.

Contact Bobby Matson: https://www.linkedin.com/in/bobbymatson

Learn more about Payitoff: https://payitoff.io

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This episode is brought to you by N2N’s Illuminate App, The iPaaS for Higher Education.

About N2N Services

Founded in 2010, N2N is committed to serving educational institutions and helping them figure out how to serve their students, faculty, and staff using the most innovative technologies and solutions available in the marketplace. Over the last decade, N2N has served over 300 academic institutions and enabled their student success journeys.

N2N Services Inc. is a leader in enterprise application integration and strategic advisory services for higher education, At N2N, we are committed to providing the highest quality solutions and collaboratively building student-centric solutions.

Learn more at https://illuminateapp.com/web/higher-education/

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