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With 70 percent of students leaving college with student loan debt, the wealth gap between student borrowers and student non-borrowers continues to widen.
During student debt repayment, borrowers are not able to participate along with their loan-free peers in many wealth accumulation events, such as buying a home, starting a family, or saving for retirement.
That is what motivated Laurel Taylor to start FutureFuel in 2016.
Why FutureFuel Was Started
Taylor founded FutureFuel with the mission of making implementation of student debt repayment easy for employers to offer as a key employee benefit.
In her research, Taylor found that more than half of employees with student loans opt out of their company’s 401(k) plan due to the crushing burden of student debt.
Student borrowers are forced to miss out on the crucial early years of compounding returns, which makes saving for a secured retirement more expensive in the later years.
Taylor was part of the majority of college students who couldn’t afford to pay for college without borrowing and experienced firsthand the heavy burden of a 20-year repayment period.
Turnkey Employee Benefit Solution for Student Loan Repayment
The concept behind FutureFuel was to develop technology that would allow employers to easily and efficiently turn on student debt repayments as an employee benefit, which would make it easier for employees to pay down their debt.
Meanwhile, FutureFuel was also developing an online marketplace for employers who offer debt relief benefits to match them with the type of employee talent they need, specifically in the science, technology, engineering, and math (STEM) fields.
There is tremendous demand for STEM talent which is made up of college graduates carrying substantial student debt. These are young college grads who are obviously serious about their careers and would probably look more favorably on employers offering debt relief than those offering lunchtime foosball tournaments.
Connecting Employers With Tech-Savy Talent
FutureFuel “fuels” the marketplace by connecting employers with the tech-savvy talent they need through a mobile accessible platform that operates like a 24/7 career fair. Currently, only 4 percent of employers offer any kind of student loan repayment benefit presenting FutureFuel with plenty of upside potential. FutureFuel looks to get the edge on a growing field of competitors, such as Gradifi, Tuition.io, and Student Loan Genius, by creating a dynamic interaction between companies needing specialized talent and qualified job seekers.
FutureFuel makes its money by charging a transaction fee to companies that use its software platform to manage employee benefits. It also charges consulting fees for assisting companies in designing employee benefit programs tailored to employee groups. In addition, FutureFuel earns a percentage of student loans that are refinanced through its online marketplace.
If you’re interested in refinancing, check out LendEDU’s guide to the best companies to refinance student loans – where you can shop for interest rates from reputable lenders. Remember to check the disclosures on the page to learn more about our marketplace.
FutureFuel’s Fast Start
So far, FutureFuel has received one round of financing, a $1.6 million seed investment from an angel investor, which gives the startup a valuation of $4 million. The company is barely a year old and has been named one of the 10 Hottest Boston Startups in 2016. Recently the company partnered with Quovo to roll out a state-of-the-art SaaS (software as a service) platform with new features that allow account linking and updates on loan repayments, and it is partnering with Credible to enhance its lending marketplace.
Seeking Tax Parity With 401(k) Plans and Other Benefits
So convinced that employer-sponsored debt repayment can significantly reduce the time it takes for student borrowers to retire their debt, Taylor has gone to Washington D.C. twice to advocate for more favorable tax treatment. The one downside of employer-sponsored student debt repayment plans is that the IRS considers any loan repayment assistance to be taxable income and employer contributions are not tax deductible. Taylor would like to see student debt assistance plans treated the same way in which 401(k) plans are treated because they are key to employees’ financial security. At the very least, they should be treated in the same way as tuition reimbursement plans, which allow up to $5,250 a year to be reimbursed to employees free of taxes while giving employers a full tax deduction.
Progress is being made through congressional efforts. In April 2017, Congress introduced legislation that would provide student debt assistance plans the same tax treatment as 401(k) plans. Borrowing from the tuition reimbursement benefit, the Employer Participation in Student Loan Assistance Act would allow up to $5,250 a year in tax-free reimbursements with a $50,000 lifetime cap. Past legislative efforts have failed, but the new proposal looks to have a lot of bipartisan support.
Author: Jeff Gitlen, CEPF®