Betterment steps into the student loan business with Gradvisor acquisition

Digital advice firm Betterment is getting into the student loan business.

The company is launching a new student loan management service in Betterment at Work — its 401(k) business formerly known as Betterment for Business — that lets companies provide recommendations on how to pay off loans and employer matching services as a benefit to employees. Betterment’s student loan management is provided through a partnership with Spinwheel, which uses application programming interfaces (APIs) to embed consumer debt services into a company’s apps.

Betterment also announced that it would acquire Gradvisor, a company that provides personalized college savings plans. It’s Betterment’s second acquisition this February and will be used to include 529 plans into Betterment at Work. Terms of the deal were not disclosed.

Using Betterment’s platform, employers will be able to make personalized recommendations on 529 plans and let employees make payroll deposits into plans.

While no official timeline is set for the integration, the company plans to launch the new 529 service within months, said Kristen Carlisle, the general manager of Betterment at Work.

“There are a lot of different financial considerations employees are dealing with today,” Carlisle said. Especially after the COVID-19 pandemic, “employees are facing really steep financial hardships and really considering what they need in terms of support.”

Not only are employees asking for more help with finances, but employers are looking to make benefits packages more enticing to attract and retain talent, Carlisle said. Saving for retirement can seem daunting for someone still saddled with student loan debt, but offering help with both through a single platform can be a powerful benefit for employees.

Practice and client management

Does your advisory firm have a Great Resignation backup plan?

November 8, 2021 12:37 PM

For now, the company is only looking to roll this out alongside its 401(k) business and not offer it on the retail-facing robo advisor or on Betterment for Advisors. That functionality could come further down the road, Carlisle said.

Nor is the company currently looking to get into student loan refinancing, like digital advice competitor SoFi.

“Our foray into student loans right now is looking into the tools that allow people to understand and control [their debt] across multiple lenders, make decisions about how to pay down debt and how to pay down more effectively alongside saving for retirement,” Carlisle said.

As the last of the major independent robo advisors following Wealthfront’s sale to UBS last month, Betterment will continue to broaden its product offering beyond simple managed accounts for individual investors, said David Goldstone, manager of research and analytics for Backend Benchmarking.

“This acquisition will help differentiate their Betterment at Work product suite as they try to compete and win business from other major 401(k) providers.”

Betterment isn’t the only wealthtech company adding student loans to its product suite. Digital recordkeeping firm Vestwell acquired Sumday, which manages and administers college savings plans, from BNY Mellon in November. By adding student loan services, Betterment proves there is increased industry demand to provide more holistic financial wellness programs, said Vestwell CEO Aaron Schumm in a statement.

"I anticipate employers expanding their offerings in the coming years to better serve their employees," Schumm said.