This Fintech Entrepreneur Is Banking on Disaster. Literally.

The looming spectre of a student debt crisis gets Kelly Peeler out of bed every morning. It also inspired her company.

Colleen DeBaise By Colleen DeBaise

Editor’s Note: This is the second part of a two-part series on entrepreneurship and student debt. Part 1 looks at the burden of student debt on would-be entrepreneurs.

 

As a student at Harvard University during the Great Recession, Kelly Peeler studied 300 years’ worth of financial crises. She wrote a senior paper on financier J.P. Morgan and the Panic of 1907. Her hobby, if you will, is economic disaster. And when it comes to meltdowns, she sees one looming.

“The next financial crisis is rooted in the student loan market,” she says, with marked confidence. “I see similar leading indicators around the dynamics of student loans that parallel back to the mortgage crisis or financial crises throughout history.”

Peeler, who describes herself as “obsessed” with the topic, notes that the average student graduates with $37,000 in debt. “Students are actually signing up for loans that they don’t understand,” she says. “An 18-year-old making the biggest financial decision of your life, without the information necessary, seems pretty predatory to me.”

Enter Peeler’s financial tech startup, NextGenVest, which she co-founded in 2014. Its mission is relatively simple: Educate Generation Z — that’s young people born after Millennials, in the late 1990s or early 2000s — on the perils of student loans, before they become saddled by a crushing amount of debt. And do it in the way they understand, which, to this Snapchat generation, means via text messaging.

A Financial Education Via Text Message

Peeler and her co-founder, William Falcon, who raised seed money from angel investors, have created a technology platform to help thousands of students across the U.S. navigate the financial aid, scholarship and student-loan process. Falcon, a software engineer, specializes in artificial intelligence and developed the sophisticated software.

On the surface, the NextGenVest platform looks a lot like ordinary text messaging: A young person confused about the financial aid process can send a message to one of the company’s “Money Mentors,” or trained college students who have been through the process themselves. “They can get one-on-one advice from someone who’s kind of like their cool older brother or sister,” Peeler says.

Behind the scenes, the software combines tools and analytics to predict where the conversation is going and automate elements of it. That allows each Money Mentor —  the company has about 200 of them — to advise hundreds of students at once, 24/7. “We actually use really sophisticated machine learning … to ‘supercharge’ our human conversations with students,” Peeler says.

Help Navigating Financial Aid, Student Loans

NextGenVest, which is now actively used in New York, Chicago, Los Angeles and other cities, claims to have helped more than 50,000 students receive some $40 million in aid — often, just by helping them fill out forms correctly. Some students don’t realize they can apply for free federal grants; others need help filling out loan applications. The company also works to prevent students from accumulating too much debt, a stressful situation that can cause many to drop out of school or restrict their choices after graduation.

In some cases, a student will take a photo of his or her financial aid award letter and send it via text message to the Money Mentor. The technology will “translate” it, spelling out exactly how much has been awarded. Excited students who think they’ve received mountains of aid often need to be educated. “Our technology will read it and will be able to say, ‘Wait a second, no, you weren’t awarded $19,000. You actually owe $19,000,'” Peeler says. It’s not because “the student is stupid,” she adds. “It’s because the letters are incredibly confusing and misleading and not standardized.”

Peeler says the business model, still in its early stages, will ultimately be similar to that of Credit Karma, which offers free credit tools but makes money through financial product recommendations. With NextGenVest, Peeler hopes to gain the trust of Gen Z users, helping them first tackle the complicated issue of student loans, then eventually assisting them open bank accounts, apply for credit cards or make other financial moves. NextGenVest would recommend products and receive a referral fee from the bank or lender, Peeler says.  

If she’s successful, Peeler hopes she’ll be able to stop the next meltdown in its tracks. While regulations and safeguards have been put in place since the Great Recession, “I do not think that we are exempt from future financial crises, and that was really the motivation of starting NexGenVest,” she says.

Like the famous financier she once studied, “we’re really thinking about what does it look like, to build the next 100-year-old brand for the next financial institution.”

Posted: January 15, 2018

Colleen DeBaiseThis Fintech Entrepreneur Is Banking on Disaster. Literally.