When Michael "Mick" MacLaverty and Cory Micheel were working on their MBA’s at UCLA’s Anderson School of Management, they were both racking up federal and private student loan debt. Collectively, that represented tens of thousands of dollars, MacLaverty said.
So they wanted to create a company that would help debt holders, as well as assist companies with their recruitment and retention efforts. They launched Highway Benefits in 2021.
The startup helps companies create and manage custom benefit plans to contribute to their employees' student loans, tax-free.
There are more than 45 million people with federal and private student loans, according to Highway Benefits. This represents about one-third of the U.S. workforce.
And despite the economic downturn, Highway Benefits is seeing an uptick in the adoption of student loan repayment benefit, MacLaverty, who serves as CEO, told L.A. Inno.
“While employers certainly think more about every dollar, the impact that this benefit can have on retention and attraction makes it well worth it, not to mention the impact it has on their employees' lives as well,” he said. “Additionally, increased awareness around (some) loan forbearance coming to an end this year has led to tailwinds for the business.”
Offering student loan repayment as a benefit can help employees pay off their loans a little bit faster and can save them money by reducing some interest on their debt, he added.
Highway Benefits just closed a $3.1 million seed round, led by XYZ Venture Capital. That brings the total the startup has raised to date to $6.2 million, according to Crunchbase.
How it works
Highway Benefit’s first product is a student loan matching platform, which enables employers to design a custom plan that gives them the ability to contribute to their employees’ student loans. Highway Benefits can be integrated into a benefits program for companies with as few as five employees. It’s capable of handling employers with as many as 500,000 employees.
The company charges client companies on a per-enrolled-employee-per-month basis, MacLaverty said. He declined to disclose the pricing structure. He also declined to disclose any of the company’s customers.
In early 2020, the CARES Act was signed into law, enabling employers to make tax-free contributions of up to $5,250 per employee per year to their federal and private student loans. These contributions are exempt from Social Security and Medicare payroll taxes.
But lack of awareness has stymied this benefit from mass adoption, MacLaverty said. Over the past three years, it only has a 9% adoption rate.
To combat that low number, Highway Benefits is educating companies on this benefit through a combination of sales and marketing efforts.
Highway Benefit’s headquarters are in Manhattan Beach. It also has a small team in Atlanta.
In total, it has five team members, including the co-founders.
State of student loans
Federal loan payments have been in forbearance since the start of the pandemic. The Supreme Court is expected to make a decision on President Biden’s federal loan forgiveness plan this summer.
If the federal loan payments resume with no changes, approximately 44 million Americans will have to resume an average of $400 in monthly payments.
“A resounding piece of feedback we received was to make sure we created an extremely hands-off product,” MacLaverty told LA Inno. “This is something we’ve kept in mind as we continue to build the company.”
