Two Harvard Business School students may have just cracked the code to lower student loan rates. In an economy where 20 percent of millennials expect to carry their student loan debt for the rest of their lives, that’s a pretty big deal.
Every year, UMKC students are faced with loan offers from banks. Many of the offers include
Banks determine the quantity of interests rates, the reason loans become so hard to pay off. With little competition between banks, students don’t get much say in how high the interest rates are. Even government loans (which are supposed to exist as a federal service to US citizens) can have rates as high as 8 percent. If your loan is big, that means paying tens of thousands of dollars extra, no alternative.
Does it have to be this way? Nikhil Agrawal and Chris Abkarians just proved otherwise.
Agrawal moved to the United States from India 10 years ago. After working as a Boeing aerospace engineer for six years, he was admitted to Harvard Business School last spring.
But then, he realized he was going to have to take out a private student loan for $150,000 out of the total $218,000 it costs to attend. By the time the loan is paid off, he could expect to pay around $64,000 in interest.
Agrawal learned some of the others in his class directly negotiated with a bank to lower their student loan rates during a GroupMe chat with his soon-to-be fellow students. The students were from Israel, and Agrawal wanted to see if he could be the first in the United States to do the same.
The total savings was $3.3 million for the group of 400 students. Each participant saved an average of $7,500 in interest.
Some students even chose the loan Agrawal and Abkarians negotiated for over one from the federal government. Even though it was a private loan, it was cheaper.
After such success, the two knew they were onto something. Despite never meeting in person, they started LeverEdge, a business that could give student loan borrowers negotiating power in one of the biggest financial commitments of their lives.
Agrawal and Abkarians’ market-disruptive approach to one of today’s biggest economic burdens is now available to all graduate school students.
The two have yet to make a profit off LeverEdge—the company gets paid a referral fee by banks, not by students.
But Agrawal and Abkarians have made a name for themselves among financial institutions. Before the deal, bank executives didn’t take them seriously. Now, every bank they approach is willing to participate in the spring negotiation, Agrawal said.
The best part? The more students that sign up, the bigger the group discount will be.
“We’re now in the process of expanding the number of schools we work with,” said Agrawal. “And the University of Missouri – Kansas City is on our radar.”
To join the group, students can go to the LeverEdge website and add their name and email to the list.