Startup Spotlight #15: AlmaPact

As a Turk born & raised in Istanbul, I can say that I never got a student loan, like most…

Home
by Gökhan Menge 2 August 2019

As a Turk born & raised in Istanbul, I can say that I never got a student loan, like most Turkish students. In Turkey, students usually go after grants from either the government, NGOs or companies. But as we watch lots of Hollywood movies, we are also aware of the current situation about student loans and the cost of going to college in the US.

Let’s be honest: Only a very small portion of new grads can land a good job to pay his/her student loan without a problem. Others usually need a better payment plan for their student loans, according to their financial situation. AlmaPact helps those new grads.

AlmaPact is a startup that seeks to make life easier for people on heavy student loans with flexible income sharing agreements. You can find more info about AlmaPact, with words from one of the founders, below.

You can always apply for Startup Spotlight from this link. We will also include you into our network and you will be notified about our upcoming events, calls for programs and get exclusive invites.

What is the name of your startup?
AlmaPact

What is the website address of AlmaPact?
https://www.almapact.com

Where is your startup based?
United States

What are your targeted verticals for your startup?
Fintech

Tell us what your startup does.
AlmaPact is a mission-driven company that seeks to change lives for the better by replacing student loans with flexible income sharing agreements. Just like a startup securing an investment, ISAs provide students the opportunity to pay for school by guaranteeing a certain percentage of their income over a 6-10 year time span. We believe that our mission holds much potential for economic and social impact as America addresses the looming student loan crisis.

Tell us about your team.
We were founded by two female students at the Harvard Business School during their time as students (Tess Michaels and Kelly Shaw).

Since then, our team has expanded—we hired Patrick Conner, former SVP at Wells Fargo and SoFi with two decades of experience in the industry and through the acquisition of Base Capital, one of the leading ISA providers in the industry, brought on its CEO, Brendan Florez, as our CTO.

Apart from those key players, the heart of our company is the students! We are a company for students, by students—our director of marketing is a rising sophomore at Harvard undergraduate, our head of data science is an undergraduate student, and we have brought on many other student interns to continue to strengthen our student perspective. These students are the ones currently dealing with the problems of student debt and are best equipped to help others in their position and have made such an amazing impact!

When and why did you found your startup?
In short–The student debt crisis continued to grow and it seemed no one was doing anything about it! We saw our friends increasingly delaying life events as they cope with debt obligations. They need more flexible options for financing their education!

In long–As students, we have been trained to study, examine, question, and propose solutions. With first-hand experiences of student burdens as students at Harvard Business School our founders figured it was time somebody stepped up to tackle this growing economic problem—we are amidst a student loan crisis!

Since 2003, there has been a six-fold increase in student loan debt, increasing median debt by $10,000 per borrowing household. The major issue is the most manifest in the borrowers’ inability to repay: student loan default rates are at about 11.5%. After accounting for the repayment difficulties in the early stages, the default rate on federal student loans is 42%, and is rising fast. The result: the financial future of millions of Americans is at stake!

Student loan debt problem has profound ripple effects across our entire society. Quite simply,education – particularly higher education – has been the cornerstone to economic progress and social mobility in America, which in turn, has helped strengthen the American middle class. Recent research by Opportunity Insights team has proven that rates of absolute social mobility (defined by children earning more disposable income than their parents) have declined from ninety to fifty percent over a 40-year span while national inequality has bubbled up, with the top 10% of Americans earning over 30% of the national income. We believe that affordability and quality of higher education is at the root of several such social inequities.

AlmaPact is excited to be part of the solution to these underlying causes leading to student loan crisis. We believe replacing student loans with thoughtfully designed ‘Income Share Agreements’ (ISAs) would help avert the crisis. AlmaPact ISAs will structure student repayments as a percentage of their future income, as opposed to a percent of one’s loan. This protects the financial future of students, and changes the way in which students, universities, and lenders approach student financing. In fact, if a student graduates and makes less than $40,000, they do not have to begin paying a cent! We also provide a grace period after graduation so the student can find the right job, rather than a quick job to start paying back debt as a traditional loan would often force students into. This way of financing is path-breaking because it changes student lives for the better. Since one is paying based off his or her income level, they will be paying less money when they earn less and paying more later in their career when they earn more. Thus, the stress of immediate repayment on graduation is relieved, and we help reduce the unsustainably high and continually rising default rates!

In doing so, we are bringing a new approach to measuring effectiveness of institutions of higher learning. Our income prediction models take into account the university one is enrolled in, the program they are enrolled in, and more! This way, we are able to provide personalized rates to individual students based on their individual situation and needs—not the economic standing of their parents. Creating this new eco-system calls for a holistic approach in sharing the economic risks and returns in student financing. AlmaPact is focused on this goal, working alongside thought leaders in education and senior executives across industry sectors.

What are your key and unique features?
Putting the student first! AlmaPact ISAs have aligned incentives—as the students do better, we do better! We provide those we finance with “Pact Perks” to help them with their career by connecting them with industry experts, other students in their program across the country, networking opportunities, and more. We are a company founded by students for students and that is apparent in all of the things we do.

What is your growth like?
Our growth can be seen in many aspects of our startup. To begin, we have had $6 million of ISA demand, with 75% of that coming in the last month alone! This recent growth can be accredited to our growth in other areas—we tripled our number of employees by taking on student interns and acquired Base Capital to help aid in the logistical underwriting of the agreements.

Tell us about the numbers that matter to you.
We’re a number’s driven business… it’s all about the number of students we help who can now afford school and how quickly we’re growing in number of users, number of programs covered, number of schools penetrated… we also need to be efficient, how much did it cost per student acquired and how long did it take (sales cycle).

What are your plans for next year and the next 5 years?
In the next year we plan to sign up and onboard hundreds of students onto AlmaPact. We plan to increase awareness around the improved flexibility and affordability of an ISA. In the next 5 years we plan to have 100,000 funded via an AlmaPact ISA. We’ll have fully created the “Pact” community offering mentorship, recruiting services, and networking to ensure the best outcomes for students.

Did you receive any investments?
Our current investments derive from friends and family and start up competition prizes. Early fall, we are seeking seed funding.

Tell us 3 startups that excite you, and why?
1) Clarity AI : Clarity is a software platform that allows investors to assess the ESG risk and impact of their portfolio. I find Clarity AI really exciting as they seek to change the investment paradigm by helping investors to incorporate impact assessments into investment decisions, in order to drive improved capital allocation, thereby enabling positive societal and environmental change.

2) TalkSpace – Mental health is a major problem in the US, and not enough people seek help. I love how TalkSpace helps anyone get the help they need, even busy professionals or those that don’t feel comfortable going directly to a physical office.

3) All_EBT – All EBT seeks to bring the 36MM people on food stamps into the digital economy by converting their paper food stamps into a prepaid credit card. I find this incredibly exciting, as it allows those on food stamps better access to quality food, as most live in food deserts.



You can Apply for Startup Spotlight! We will cover you in one of our next issues!

Click here to go to application form!