Betterment acquires Gradvisor to secure student loans

Digital consultancy 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 allows businesses to provide recommendations on how to repay loans and services employer matchmaking as a benefit to employees. Betterment’s student loan management is provided through a partnership with Spinwheel, which uses application programming interfaces (APIs) to integrate consumer debt services into a company’s applications.

Betterment also announced that it would acquire Gradvisor, a company that offers personalized college savings plans. It’s Betterment second purchase in February and will be used to include 529 plans in Betterment at Work. The terms of the contract are not disclosed.

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

Although no official timeline has been set for the integration, the company expects to launch the new 529 service within months, said Kristen Carlisle, managing director of Betterment at Work.

“There are a lot of different financial considerations that employees face today,” Carlisle said. Especially after the COVID-19 pandemic, “employees are facing very significant financial challenges and are really thinking about what they need in terms of support.”

Not only are employees asking for more financial assistance, but employers are looking to make benefits more attractive to attract and retain talent, Carlisle said. Saving for retirement can seem daunting for someone still struggling with student debt, but offering help for both through one platform can be a huge benefit for employees.

For now, the company is only looking to roll it out alongside its 401(k) business and not offer it on the robo-advisor or Betterment for Advisors. This feature may come later, Carlisle said.

The company is also not currently looking to get into student loan refinancing, like digital advice competitor SoFi.

“Our foray into student loans right now is looking at the tools that allow people to understand and control [their debt] between multiple lenders, making decisions about how to pay down debt and repay more efficiently while saving for retirement,” Carlisle said.

As the last of the leading independent robo-advisors after Sale of Wealthfront to UBS last month, Betterment will continue to expand its product offering beyond just managed accounts for individual investors, said David Goldstone, head of research and analytics for Backend Benchmarking.

“This acquisition will help differentiate their Betterment at Work suite of products as they attempt to compete and win business with other large 401(k) providers.”

Betterment isn’t the only legacy technology company to add student loans to its product line. Digital Archiving Cabinet Vestwell acquired Sumday, which manages and administers education savings plans, from BNY Mellon in November. By adding student loan services, Betterment is proving that there is increased industry demand to provide more holistic financial wellness programs, Vestwell CEO Aaron Schumm said in a statement.

“I anticipate that employers will expand their offerings in the years to come to better serve their employees,” Schumm said.

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