If you’re a fan of ABC’s hit entrepreneurial show Shark Tank, the ChangEd app may already be familiar to you.
The student loan debt repayment app was featured on a Season 9 episode of the popular reality show. And the owners of the company came away with a deal from famous “shark” Mark Cuban!
The brand has since taken on Cuban’s influence, and was even featured on an update segment during a Season 11 episode of the show to exhibit the progress made:
The show paints it as an early success story. And that’s great. But what exactly is the ChangEd app and how well does it work?
ChangEd uses a “round up” method for saving money. It tracks your purchases, rounds them to the nearest dollar, and then moves the money to a bank account that automatically applies payments to your student loans.
If you’re familiar with the Bank of America “Keep the Change” program and the like, you might already be aware of the idea of “rounding up” purchases for the purpose of saving money. If you’re not, we’re going to take a deeper look at the service to help you understand the concept.
Table of Contents
- What Is the ChangEd App?
- How Much Does the ChangEd App Cost?
- How Does the ChangEd App Work?
- Is the ChangEd App Worth It?
- Is the ChangEd App Safe?
- Final Thoughts
Team Clark wants to make sure those of you who have watched the Shark Tank episode or are just looking for a way to pay off student loans have a better idea of what you’re getting into when you sign up for the ChangEd app.
For the purposes of this review, I downloaded the app and signed up for an account with the service to take a look around.
However, I do not have any student loans in need of paying, so this review will not contain first-hand results of using the service for the purposes of paying off a loan.
What Is the ChangEd App?
It is designed to help people with student loans repay their debts in a shorter period of time by rounding up the amount of any purchases made with their bank account, debit or credit card. For example, if you spend $2.43 on a cup of coffee, the app will round up the charge to $3.00 and set the extra 57 cents aside to be applied toward a payment on the balance of your student loan.
Note that this is not intended to replace your regular payments on your loan. Instead, it is intended to build up savings for additional payments toward the balance of the loan. In turn, it can save you money paid on interest and shorten the term you’re straddled with the debt.
The ChangEd app created this video to better explain how the saving process works:
How Much Does the ChangEd App Cost?
The ChangEd app itself is free to download. However, there is a flat $1 per month fee to use its services.
ChangEd app co-founder Nick Sky explains why the service charges the monthly fee: “This dollar covers the costs to not only move your money and send payments but to also store that money in a personal FDIC-insured account.”
How Does the ChangEd App Work?
So, by now you probably have questions about how all this works. How does the ChangEd app know how much money to take from your account? What happens to the money when ChangEd takes it from you? Can you get it back if you change your mind? I know those were all questions that ran through my head when I heard about this app.
Thankfully, I was able to find all of those answers as I downloaded the app and poked around a bit.
Here’s a quick rundown of how this process works for the user:
- You set up an account with ChangEd and connect your outstanding student loans.
- You connect bank accounts, debit cards or credit cards that you use to make purchases.
- ChangEd analyzes your spending on the linked account. Each time you make a purchase, ChangEd will round the amount up to the next dollar.
- Once the rounded amount (57 cents from a $2.43 purchase rounded to $3.00, for example) reaches a cumulative $5, it is taken out of your linked bank account and set aside in a separate FDIC-insured bank account in your name.
- Once you have accumulated $100 in your FDIC account, that money is automatically sent to your student loan company as a payment against the balance of your loan.
In theory, you could save hundreds or even thousands of dollars by passively saving and letting ChangEd lower the balance of your student loan. The reduced balance will lead to a lower amount of money paid toward interest on the loan and ultimately a quicker loan payoff.
Interested? Let’s talk about the setup process I encountered with the app.
The Setup Process
When I downloaded the app, it required a multi-step setup process to get things started.
This is the information you should expect to provide in order to setup an account with ChangEd:
- Legal name
- Date of birth (must be 18 or older)
- Phone number
- Home address
- Student loan information (Name on loan, service provider, account number)
- Loan details (Interest rate, repayment date, loan length, due date, amount issued)
- Bank Account Information (Cards and accounts from up to two institutions)
As you’ll note above, having your student loan information connected to your ChangEd account is essential to actually using the app to pay down the debt.
Student Loans Serviced
Are you concerned that your student loan service may not connect properly with the ChangEd app? The service’s website has a student loans resources page that can help you find the information needed from the following student loan providers:
- Great Lakes
- FedLoan Servicing
- Edfinancial Services
- CornerStone Education Loan Services
- Granite State Management & Resources
- OSLA Student Loan Servicing
- Discover Student Loans
- Sallie Mae
If you don’t see your loan provider on the list, ChangEd has a form you can fill out to get their assistance connecting a loan from a non-listed provider.
Credit Cards Can Be Used
If you follow the suggestions of money expert Clark Howard, you probably know that he endorses using a credit card for most of your day-to-day purchases. Not only do many issuers offer perks worth cashing in on, but credit cards offer added consumer purchase protections that don’t usually come along with debit cards.
That’s why I was excited to find out that the ChangEd app actually will let you use a credit card, as long as you attach a checking account to work in tandem with the card.
The app tracks the spending you do on the credit card, then makes the “round up” charge to the attached checking account. That way you don’t run the risk of higher credit card interest charges as the result of trying to pay off your loan.
Is the ChangEd App Worth It?
In an introductory email to new users, ChangEd boasts that the average user saves between $30 and $50 per month by using the app.
So exactly how much money is that saving someone on their student debt in the long run? I decided to find some numbers on student loan debt to get a better understanding of the impact a $1/month subscription to ChangEd could make.
National Averages for Student Loans
Here are the important takeaways of note:
- Using data I found through Nitro College, I decided to work on the assumption that the average United States citizen with student loan debt from college owes approximately $37,172.
- A study referenced by CNBC indicates that it takes — on average — 19.7 years to repay undergraduate student loan debt. For the sake of easy math, I rounded that up to an even 20 years.
- According to Sallie Mae, undergraduate student loans can carry a fixed interest rate between 4.74 and 11.85%. ChangEd says that the average national rate on student loan debt is 6.8%.
Under those conditions, a person making minimum payments on $37,172 worth of loans at 6.8% for 20 years would end up paying $30,927.66 in interest alone. That would nearly double the amount they borrowed in the first place!
So how much would you have to spend with your linked accounts to get to $50 per month in your ChangEd account? Unfortunately, that number is not exact because roundups vary. For instance, a $1.01 purchase puts 99 cents into your ChangEd account while a $267.82 purchase only puts 18 cents in there.
But let’s assume you make it to $50 per month on the app. I decided to use the numbers above to see what kind of impact using ChangeEd could have.
ChangEd App’s Potential Impact on Student Loans
|National Average Student Loan||Estimated Interest Paid||Estimated Payback Time||Estimated Total Paid on Loan|
|With $50 per month from ChangEd||$16,928||12 years||$54,100|
|Without ChangEd||$30,928||20 years||$68,100|
It’s important to note that the chart above is simply an illustration of the potential impact of using the ChangEd app.
Each student loan has different variables involved in the repayment process, including the way that extra payments are applied to the principle balance, so please be sure to do your own analysis of your specific loans.
Is the ChangEd App Safe?
The ChangEd app says your money and information is secure because:
- Your money that is “rounded up” is actually placed in a FDIC-insured bank account until time for a student loan payment. ChangEd opens this account in your name with the information you provide them during the signup process.
- ChangEd says that your banking credentials are not kept on their servers and are encrypted at bank-level security standards. In other words, a potential hack of their servers theoretically should not expose your banking credentials.
- However, your personal information is kept on what they term as a “secure database” for the purposes of payment and account service.
If you’re worried about what happens to money you’ve saved on ChangEd if you decide to close your account with the app — don’t. The money is automatically taken out of the FDIC-insured account and refunded to the bank account you have on file with them.
Final Thoughts on ChangEd App
Still trying to decide whether or not the ChangEd App is right for your student loan repayment plan? Here are some pros and cons to think over:
ChangEd App: Pros and Cons
|Passively pay back your student debt||Must grant access to your purchasing habits|
|Relatively low cost at $1 per month||Requires personal information for signup|
|Can connect purchases from a credit card||The service requires a monthly subscription|
Bottom Line: While this app probably shouldn’t be your lone strategy for eliminating student loan debt, it can be a useful tool to help you along the way. The $1 monthly fee seems like a worthwhile investment if your monthly spend on a credit or debit card is significant.
Do you have experience with the ChangEd app? We’d love to hear your thoughts in the comments below!