In the last twenty years, the cost of college has increased by roughly 200 percent. Sixty-five percent of college seniors graduate with student debt, contributing to a national student debt total of $1.6 trillion. The average United States household with student debt owes over $47,000, forcing families and students to make loan payments for years after graduation. With college costs skyrocketing, Jordan Lee ‘13, founder and CEO of CollegeBacker, urges families and future parents to be proactive in saving for college with CollegeBacker, a Princeton Alumni Entrepreneurs Fund portfolio company.
CollegeBacker is a free website that helps to streamline the process of opening a 529 College Savings Plan. A 529 plan is a government-sponsored investment vehicle meant to combat the $1.6 trillion in outstanding student loan debt by helping families prepare financially for college. The account incentivizes families to start saving for college early with tax-free growth and tax-free withdrawals. Unfortunately, 529 plans are underutilized, with 70 percent of families unaware of them.
Seeing the positive impact education had on his own life and recognizing the untapped potential of 529 plans, Lee decided to start CollegeBacker to simplify the process of opening one. His commitment to improving access to higher education is echoed in CollegeBacker’s mission: "To make college affordable for every American family."
As an SEC registered investment advisor, CollegeBacker suggests the best 529 plans, typically recommending age-based portfolios that start out more aggressive and moderate as the child gets closer to college. The tax advantages of 529s will generally help a saver outperform the stock market and do much better than a typical savings account. Additionally, CollegeBacker provides "circle funding" features that let relatives and friends contribute to a child’s college fund. As a result, CollegeBacker users are investing 43 percent more, on average, than they would have without CollegeBacker.
In the last few months, CollegeBacker has gained significant traction, nearly doubling in size. "We are currently at around $3 million in total assets that our families have saved," said Lee. "Almost all of them are new to 529s, so we’re definitely tapping into an audience that the industry has struggled to reach."
CollegeBacker has succeeded in helping families approach saving for college more proactively. The median age of a CollegeBacker child is three years old, and 20 percent of signups are actually saving for a future child.
"We expect to be helping many of our families for the next 18 years," said Lee. "It’s never too early to start saving, and even a few dollars a month can go a long way in helping you save enough to afford college or at the very least, avoid crippling student loan debt."
CollegeBacker’s current focus is to sustain its recent growth, with the goal of reaching a million families. Learn more at collegebacker.com.