Summer Co-Founder and CEO Will Sealy joins the Yahoo Finance Live panel to discuss the latest outlook for tackling student debt.
- Let's get to some news that we got today on student loan debt. President Biden's chief of staff saying today that the president is looking into potentially canceling student loans. Let's listen.
RON KLAIN: He asked his Secretary of Education, whose just been on the job a few weeks, once he got on the job, to have his department prepare a memo on the president's legal authority. And hopefully we'll see that in the next few weeks. And then he'll look at that legal authority. He'll look at the policy issues around that and he'll make a decision.
- We want to bring in Will Sealy for a little bit more on this. He's co-founder and CEO of Summer. And it's a platform here that you help students save money when it comes to paying off their student loans. Well, I first want to ask you what we just heard from Ron Klain, the fact that he was saying that the president is looking into a way, looking into his legal authority, I should say, to cancel student debt. What's your reaction to that?
WILL SEALY: Yeah, we just, for context, represent tens of thousands of borrowers who are actively trying to navigate a complicated repayment landscape. And this is folks of all ages. The average age on our platform is well into folks late 30s, early 40s. So people are spending decades navigating this issue. And so when the president is saying that he's navigating the student loan repayment process for the whole cohort of $1.6 trillion of debt across 45 million Americans, I think it reflects the complexities that are involved and him wanting to get it right.
You have a lot of progressive groups that are pressuring the White House to take immediate action on mass cancellation. Obviously, there are a lot of folks on the other end who are saying, I've already paid my student debt. How does that impact me? At the end of the day, we represent borrowers and we want what's best for them. And so we think some form of cancellation makes sense.
- When I was looking at your profile, formerly at the Consumer Financial Protection Bureau, correct?
WILL SEALY: That's correct.
- So you've seen how some of these loans can take advantage of people who don't quite understand what they're getting into. I was most impressed with the average savings that Summer has of $30,000 for people with consumer loan. I call it indentured servitude. Can you tell us more about how you save people money?
WILL SEALY: Yes. So summer was created by borrowers to help student loan borrowers across the country. I, myself, have student debt. Many of the folks at summer do, as well. We with we work with large organizations like the American Federation of teachers, representing nearly two million teachers who, during the pandemic, as you well know, have been put into really tough positions trying to help their students get the education they deserve, all while doing it during a pandemic that is putting many people's lives at risk.
We just don't believe that student debt should be the thing that pushes them over, the edge the thing that prevents them from being able to help the people in their communities that they seek to do. And so we go in and help teachers, we help doctors, nurses, anyone who's amassing student debt, enter into affordable repayment programs. These are federal, state, and other programs that exist to help people navigate, programs like Income Driven Repayment. Unfortunately, these programs are very complicated.
And the reality is is even if the Biden administration does cancel a huge portion of student debt, unfortunately, in this country, that's debts not going away. And so we exist to help create a system where borrowers can enroll in these programs that are complicated to do. A lot of people liken it to filing your taxes, only there has never been an accountant there to help in any shape or form. We're trying to fill that void, give them a trusted source of information, and the software to navigate those tough, complicated application forms.
- RT, I think you need to unmute.
- I believe I am unmuted.
- There you go.
- Weill, we've talked a lot about administrative burden. And we've talked about this issue of IDR and, basically, paperwork being such a challenge. But I'm curious can, you tell us a little bit about the partnerships you've had with the AFT and other organizations, how that works, and how you created them.
WILL SEALY: Sure thing. So the American Federation of Teachers, which represents close to two million teachers across the country, they're constantly trying to represent teachers' best interests. And they provide a host of membership benefits in the affiliation. And so they're introducing Summer to teachers. We have similar partnerships with AFSCME, an organization that represents over a million public sector employees. And we've heard from these unions that their members are struggling to enroll in programs like Income Driven Repayment, Public Service Loan forgiveness.
And again, not too dissimilar from your taxes, they need additional support. So Summer is a platform. It's a software-based system that these unions and our other partners-- we work with dozens of employers, both for profit and nonprofit employers providing Summer to their employees as a workplace benefit. And this voluntary benefit allows people to get into these programs and save quite a large sum of money. As I believe was mentioned earlier, we're saving borrowers close to $30,000, on average, by enrolling them in these loan assistance programs that they otherwise didn't know about or tried to enroll in but were wrongly rejected.
- Will, just a follow up question. So in the CARES Act and the following stimulus package, there was a provision to basically help employers help their employees pay down the student loan debt. Can you talk a little bit about, have you started incorporating this into your platform? It seems like a very interesting way to help borrowers.
WILL SEALY: Yeah, great question. So just recently in December, Congress moved forward with a new provision that allows for employers to contribute to their student loans of their employees tax-free. So there's a tax benefit involved, not too dissimilar from a match on a 401(k) for an employee. And so a lot of employers are now asking themselves, how can we do our part to fix this problem? Clearly, this is an issue. We're hearing it every day. It's all over the news. Student debt is a problem.
And it's not just that student debt is too much. Its that it's very complicated to navigate this issue. You have spouses were two folks have student debt. And we were constantly where there's each spouse has student debt and they have student debt for their children. And so when you think about the complexities of different loans, both private and federal, there's over a dozen different types of loans, there's over a dozen different types of repayment plans, tracking it is unbelievably complicated. So I think more and more employers are realizing, what is our part? What is our role to play?
So Summer is now partnering with dozens of employers. And we're working with them to figure out how much money to allocate to their employees' student debt as another option to be able to chip away at this debt burden that is on the backs of millions of Americans.
- Weill, just quickly, one last question. So what is the worst case scenario for October? What worries you so much about that deadline?
WILL SEALY: Yeah, I think that if folks are unaware, millions of borrowers will be re-entering student loan repayment this October. It's just a few months away. And the challenge is is that borrowers are paying hundreds, if not thousands of dollars a month on their student debt. So while we've seen the economy and it's turbulence over the last several months, and really the last year, the premise that borrowers are going to be magically ready to repay in October I think is a false one.
I am personally worried about how many millions of borrowers will be at risk of missing loan payments and then defaulting on their student debt, which can result in fees of thousands, if not tens of thousands of dollars, and wrecking their credit scores along the way. So what we're doing is we're looking to partner with some very large organizations to get word out that borrowers need to start planning over the summer for this historic moment when loans come due again in October.
And one of the best ways they can prepare is by enrolling in an Income Driven Repayment plan so that if they're unemployed, their loans can be as low as $0. Or if they're underemployed, their loans will be significantly lower than what they would have paid in a standard repayment plan.
- All right. Will Sealy, great to see you, a co-founder and CEO of Summer, and then, of course, Aarthi Swaminathan, always great to have you on this.