They’ve got the tiger by the tail. Two Harvard Business School students who started their own company before the start of their first year are about to take that venture into their second year with quite a different outlook.
Simply put, they are facing big-time success.
Chris Abkarians and Nikhil Agarwal launched LeverEdge in summer 2018, shortly before arriving at HBS — Abkarians from Netflix and Agarwal from Boeing. Facing a mountain of student loans to make two years in Cambridge possible, they turned to social media, organizing hundreds of MBA students from Harvard, Wharton, Stanford, Northwestern Kellogg, UC-Berkeley Haas, Chicago Booth, and other top schools and using the power of collective bargaining to get lending institutions to lower their interest rates. The effort was wildly successful, with more than 400 students saving more than $3.3 million in interest rates on over $25 million in loans. The average student saved $8,334 compared to the federal grad plus loan option.
Abkarians and Agarwal spent the summer working to expand that pool and thereby increase the company’s, well, leverage — after all, the larger the pool, the more sway the group holds with banks. They succeeded impressively, with more than 2,500 new members and more than $100 million in closed loans.
“And we’re adding to that quite a bit every day,” Abkarians tells Poets&Quants.
EXPLAINER: HOW LEVEREDGE GETS GOOD RATES ON STUDENT LOANS
Two years of tuition at HBS costs $146,880; the estimated total cost of studying for an MBA at HBS is $215,000. But that’s not unusual. According to the latest data available, nine schools are in the $200K or greater club. And it’s important to keep in mind that HBS grads make an estimated $160,000 to start counting salary and bonus — a figure comparable at peer schools. But no one likes wasting money if they can help it, and years of 7%, 8%, even 10% interest can take a toll.
P&Q featured LeverEdge and its founders in a story in March, detailing how its business model works. Through word of mouth and social media (and often a mix of both), students find out about the company, then join the negotiation group. LeverEdge keeps banks informed about the growing size of the group and ultimately asks them to compete for an exclusive recommendation. Last year, Laurel Road, based in Connecticut, was selected and their offer was shared with students.
On July 1, LeverEdge ended this year’s bidding process and chose the winner — and Laurel Road won again, offering a 0.4% rate discount for LeverEdge members as well as a 0.25% employment discount available after graduation, a 0.25% rate reduction for auto-pay, fees and penalties waived, and other features. Once they’d accepted the deal, LeverEdge went through the process of “rolling out the product” to their members. Huge portions of the incoming MBA classes at a handful of the most elite U.S. B-schools decided to take the deal, including nearly 40% of students at UC-Berkeley Haas and nearly 30% of students at Stanford GSB.
“We started off with just our original cohort class-based preps of a programs who were using LeverEdge. We got a few thousand more people to give us their contact information, credit information, and how much they wanted to borrow,” Abkarians says of the company’s beginnings. “And then we were able to use that to construct a portfolio, an analysis of credit quality and total loan volume. Then Nikhil and I spent a long time talking to every bank, credit union, and other type of lender that has ever done anything in the student loan space, getting them interested in competing with this portfolio. So, while there’s a lot more students signing up and telling us they’re interested, we spent all of our time trying to foster these relationships with a broader set of lenders, and create more competition.
“Really, the theory of that model is, the more people there are, more lenders are interested; the more lenders there are, the better we can negotiate lower rates. It’s a positive cycle; from last summer to this summer the pool has really grown.”
EXPANSION ON THE HORIZON?
Summer is the busiest time for Abkarians and Agarwal — so much so that as August waned and a return to school loomed, the duo began planning to hire up to five employees by year’s end. Their days begin at 9 a.m. and end around midnight — but the work won’t slow now, even after this year’s negotiation period has ended, even after students begin to show up for the first classes. Because LeverEdge has expansion plans.
Abkarians and Agarwal are looking into the undergraduate loan space, where the kind of service they offer his rare to nonexistent, as well as law schools, medical schools, dental and pharma programs, and engineering schools.
“We’re spending some time effort focus on what it takes to replicate this model in those categories,” Abkarians says, “and we’re also looking at moving into the undergraduate level right now where the lending market is dramatically larger. Nobody is doing this for undergrads either.
“We just want to find every situation where there are people who need private student loans, and find a way to create a competitive marketplace for them.”