Startup Corner: Creating A Better Alternative to Student Loans

Tess Michaels, Contributor

This month, Tess Michaels (MBA ’20) introduces us to Stride Funding, a mission-oriented business that offers income-share agreement as a more flexible, affordable option to private student loans.

Tell us more about your background and what inspired you to be an entrepreneur. 

I’ve always thrived at learning by doing. I pursued my first venture during undergrad and grew the team and product. Through this experience, I saw first-hand the sharp learning curves in entrepreneurship and the importance of being a connector between ideas, people and resources. 

After a few years in finance, I really missed the operating seat and spent a couple months before HBS asking every friend and Uber driver: if they could solve any one problem, what would it be? People repeatedly mentioned how they wanted to go back to school, but the cost has increased so much—something I’m sure many of us at HBS can relate to. Thus, I became interested in income-share agreements that better align the cost and value of education. Now, I’m all in. 

What is the problem that you are trying to solve?

Everything we purchase is a percentage of income. However, in a traditional loan structure, that percentage of income is higher when someone earns less. We believe in affordability—ensuring no one pays more than he or she can afford. Also, every financial instrument, such as a mortgage, has a mix of debt and equity. It’s time education funding followed suit. Stride’s ISAs offer the needed flexibility within a student’s financial package, along with shorter duration, improved alignment, and career support.

What is your solution?

Stride offers an affordable, flexible form of financing via Income Share Agreements (ISAs) for graduate students via a direct-to-consumer approach. With an ISA, students agree to pay a fixed percentage of their income for a specified number of years after graduation instead of having fixed payments and accruing interest. 

Key benefits of Stride ISAs include: 

1) shorter duration (5 yrs vs. 10+ years in traditional loans)

2) flexible payments based on earnings 

3) downside protection (i.e., minimum income threshold of $40,000) 

4) career resources (i.e., recruiters, resume services, peer-to-peer network)

What was the inspiration behind your company/idea?

As a student entering Harvard Business School’s MBA Program, I saw first-hand that student debt was becoming a crisis. I realized that, for graduate programs, it is much tougher to decide whether it’s worth it to go back to school, and, after talking with my peers, I saw two main problems in the education market: 1) the risks are misaligned, where students pay schools up front and hope outcomes are good, and 2) there aren’t standardized ways to measure outcomes relative to expenses. I was fascinated by ISAs as a way to align the cost and benefit of an education and tackle these problems.

Who is the team behind your startup?

I’m the Founder and CEO. I spent my career at Goldman Sachs and Vista Partners, and previously started a software startup that I built and successfully exited. Patrick (Chief Revenue Officer) brings expertise in the credit and regulatory space through 25+ years in the student loan space at Wells Fargo, JPMorgan Chase, and SoFi. Ryan (Senior Marketing Manager) has experience doing marketing in the FinTech student loan benefit space at Vault (formerly Student Loan Genius). Chris (Student Engagement Manager) founded a literacy nonprofit and led 500+ students across eight countries. Aidan (Data Scientist) has previously worked at various AI-data companies and won hackathons (i.e., Amazon). Max (Chief Investment Officer) brings strong capital raising abilities and a wealth of experience working at McKinsey, Morgan Stanley, and IBM. 

We are a diverse, complementary team that combines expertise in the start-up, capital markets, and student financing space focused on tackling the student loan crisis.

How did you get started?

From the very beginning, we’ve focused on learning what we can from the field. We talked with hundreds of students across many Boston-based schools to test our assumptions and have spent many hours on the phone educating and learning from interested students (#startupbootcamp101). We also were highly metrics-driven to ensure we understood the most effective student segments and go-to-market channels and tapped into the HBS network for guidance as we grew the business. 

What’s next?

We are in the midst of growing our team, building in value-added career services, and gearing up to grow the Stride community substantially this summer. It’s time to help students fund their future and hit their “stride”!

Tess Michaels (MBA ’20) grew up in Plano, TX (with BBQ cravings 24/7) and graduated from the University of Pennsylvania. Prior to HBS, she worked in investment banking at Goldman Sachs and in private equity at Vista Equity Partners.