LeverEdge-ing Our Collective Power
LeverEdge, the brainchild of two HBS students, is continuing to disrupt the world of student loans.
With approximately $1.6 trillion in total debt outstanding and almost $9 billion of new student loans taken out in the last academic year in the United States, LeverEdge is uniquely positioned to capitalize on a substantial growth opportunity.
First covered in the Harbus in Startup Corner (March 2019), the one-year-old company has continued to build on its momentum to take on the student-loan industry in the United States. However, barriers to entry remain high, and, as co-founders Nikhil Agarwal (MBA ’20) and Chris Abkarians (MBA ’20) are finding out, their formidable vision needs to remain agile as they enter new sub-markets and approach new target customers.
The company negotiated average savings of 1.2% for a 10-year fixed-rate (compared with the lowest private loan rate the students had been offered before negotiating as a collective group) for its first cohort of ~700 students across the United States, helping to secure around $30 million in loans.
Now, nonchalant about their early success, the co-founders remain focused on their strategy, with a three-pronged approach to expansion focusing on (1) educating their target group of undergraduate and graduate students on the financial benefits and consequences of various loan structures, (2) developing their product to provide a more seamless debt-management tool for enrolled students, and (3) expanding into the next stage of growth opportunities amongst undergraduate schools and other graduate programs beyond business schools.
Product development remains a priority for the company. Despite the considerable cost associated with student loans, the co-founders believe that students often do not appreciate or fully understand the various structures and fine print of their loan contracts, and thus educating the student population is a critical task for LeverEdge. The team hopes to provide online information and comparability tools in the near future to help increase the general understanding of their prospective customer base. And eventually, together with helping students understand the financial choices available to them, LeverEdge hopes to develop a simple debt-management tool for students to utilize throughout the life of their student loan, allowing them to actively track, manage, and refinance their loans when more cost-effective solutions are available.
Expansion into other markets also remains on the agenda, and Abkarians highlights the key challenges for the company in the months ahead as it navigates the next phase of its market expansion. “Penetration of private loans versus other loans is highest amongst business students,” notes Abkarians, “and the structure of how medical, dental, and pharmaceutical program students pay for school is usually very specific to each program.”
The founders noted that the playing field varies a great deal across undergraduate programs, and different graduate schools depending on their discipline; however, the company’s growth indicates that there is indeed a considerable demand for the business. This summer, so far, the company has collated student loans of around $100 million in volume, with excellent traction at a number of top schools in the United States, including Stanford, Booth, Haas, and UCLA, each of which has seen 15% or more of its incoming business-school class sign up for LeverEdge. (This estimate is likely to be on the low side; some programs do not have due dates for tuition for 30 or more days, so school-specific data on the number of applicants are still rolling in.)
Despite the strong momentum in the business, Agarwal and Abkarians are back at HBS for their second year and hope to manage the growth of the business alongside their studies.
They shared some valuable advice for aspiring founders: “Chris and I are very different people with very different skill sets,” said Agarwal, “but we think about the business the same way. It is very important to find a co-founder who complements your skill set.”
This article first appeared in the September 2019 edition of the Harbus.