Biden Student Loan Relief: The Fintech Effect
Good morning, and welcome to Protocol Fintech. This Thursday: Student loan relief extends to fintech, M&M’s go NFT and Citi’s new deal maker.
Off the chain
Block needs to get its Cash App marketing story straight: Is it about making money with crypto, or hard work and compounding returns? Last August, Megan Thee Stallion preached the gospel of bitcoin to Block: “With my knowledge and hustle, you’ll have your own empire in no time.” Now, Ray Dalio explains how to limit risk and grow a small business in a new Cash App campaign: “You should invest in yourself.” Kendrick Lamar translates: “Slow money wins the race.” Maybe this is hobgoblin mode investing?
– Owen Thomas (e-mail | twitter)
Lenders feel relief, too
President Biden’s long-awaited student loan package is expected to help millions of student borrowers reduce their debt. It could also have a major impact on the student loan industry. With repayments set to resume in 2023, borrowers now have an incentive to refinance their loans, which could help lenders like SoFi. SoFi shares rose 4.5% Wednesday on the news.
There is still a lot of debt left to deal with. The package includes cancellation of $10,000 for people making less than $125,000 per year, with an additional $10,000 possible for those who received Pell Grants.
- Also included is a significant new program that will enable borrowers who are unable to repay loans to pay a maximum of 5% of their income.
- The administration extended the student loan repayment pause until the end of the year, a feature that began in the early part of the COVID-19 pandemic in March 2020 under President Donald Trump and has since been extended several times.
- Borrowers have been waiting to see how much of their debt will be written off and also when they will have to continue making payments. Now that these borrowers know how much it is and whether they qualify, some of them are more likely to refinance now, said Will Sealy, CEO of startup Summer, which helps students manage their student loans.
Resuming payments can be challenging for some. Many younger borrowers got into the habit of defaulting, said Harrison Hochman, CEO of Sparrow, which helps borrowers choose private student loans and refinances. “Of all the age groups of borrowers we support, they are the most anxious about resuming payments.”
- The repeated pauses in repayment have left the loan industry in a holding pattern, with federal loan servicers such as Navient, FedLoan and Granite State, as well as other lenders, pulling out of the business. “In response to the uncertainty, many companies left the student loan industry,” Hochman said, noting that a number of startups are trying to fill this void.
- It remains unclear whether Biden will resume the repayments in early 2023. The issue has become a “bipartisan political Wiffle ball,” and neither party wants to end the hiatus, Hochman said.
Even the cancellation could be an opportunity for the technology to shine. Borrowers must apply for debt relief and show proof of income, which can present complications or delays for some. The White House says the application process will be available before the end of the year. Fintech companies can help by streamlining the application process. “What we’re doing with student loans is what TurboTax and H&R Block and all these tax companies have done,” said Tony Aguilar, CEO of Chipper, which helps borrowers repay their student loans.
– Tomio Geron (e-mail | twitter)
A version of this story first appeared on Protocol.com. Read it here.
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On the money
Ethereum has set the official start date for merging. A first step of the process – the Bellatrix upgrade on the Beacon Chain – will start on September 6, the Ethereum Foundation said. Benjamin Pimentel has the overview of why the crypto world is both excited and a little nervous about the transition to proof-of-stake.
Goldman Sachs may delay the launch of Marcus checking accounts. The Marcus unit is set to have cumulative losses of more than $4 billion since inception, Bloomberg reported.
Uniswap token holders have voted to start a foundation. The Uniswap Foundation will be an independent entity focused on supporting the decentralized exchange’s native digital resource.
Big finance is coming for “buy now, pay later.” HSBC, Barclays, Visa and Mastercard are among the financial giants launching new ways to spread the costs of purchases.
A Malaysian fintech company pulled off a rare thing these days: an IPO. Starbox, a provider of payment services and digital advertising, raised $20 million through its Nasdaq listing on Tuesday. Shares closed Wednesday at $9.83, a 146% jump from the $4 offer price.
Voyager received approval from the bankruptcy court to pay employee bonuses. The $1.6 million payouts to approximately 30 employees have been one point of contention in the bankruptcy process, with creditors of the crypto lender opposing the plan.
Overheard
Ben Armstrongthat passes by BitBoy Crypto on YouTube, filed a defamation lawsuit against another YouTube personality after people discovered the public records. “I didn’t realize that my name is now so big that if I filed a lawsuit, it would be found and published,” said Armstrong, whose channel has over 1.4 million subscribers.
The creator of M&Ms releases limited edition candy based on Bored Ape Yacht Club. “At Mars, we know we have to be more innovative than ever with a brand as culturally familiar as M&M’s,” Mars Wrigley leads Jane Hwang said in a press release. The monkeys in question are part of the kingdom, Universal Music Group virtual NFT band.
Moving and hiring
Sam Trabucco steps down as co-CEO of Alameda Research. Caroline Ellison will serve as managing director. She has divided the tasks with Trabucco following founder Sam Bankman-Fried’s departure from the role in October.
Former SEC Chairman Jay Clayton will advise Web3-focused investment firm Electric Capital. Former central bank governor Kevin Warsh and Meta’s head of research Pratiti Raychoudhury will also advise the firm.
Bill.com has hired Irana Wasti as CPO and Sofya Pogreb as COO. Wasti previously held the same product role at Typeform, while Pogreb was most recently COO at Next Insurance.
Citigroup hired Matthew Harlow away from JPMorgan Chase to focus on fintech deals, Bloomberg reported. Harlow spent 11 years with JP Morgan’s financial institutions group.
Treasury Prime made three executive appointments. The banking-as-a-service company has hired Meghan Ryan, a former Affirm executive, as chief financial officer and Nicole Phillips as vice president of marketing. It also promoted Remy Carole from VP of Operations to Chief Operating Officer.
Celebrity crypto endorsements aren’t over yet. Blockchain.com said it has a multi-year deal for Dallas Cowboys quarterback Dak Prescott to serve as its brand ambassador.
The bank app Dave has appointed Tesa Aragones to its board. Aragones was most recently Discord’s head of marketing.
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