7 out of 10 college graduates leave school with a student loan. The total amount outstanding exceeds $1.8T. The CARES Act of 2020 and the extension from the Consolidated Appropriations Act allow employers to contribute up to $5,250 per year in annual student loan payments as a tax-free benefit to employees through 2025. Highway Benefits is a benefits administration platform that allows employees and employers to take advantage of this provision. Companies can get onboarded quickly with a single call and offer customizable benefits that do not require a massive administrative burden for HR teams as the platform handles payments to loan servicers as well as enrollment and eligibility checking. Offering a tax-free solution is more impactful than a straight raise of an equivalent amount in terms of paying down loans. Helping employees with student loans has been shown to improve workplace productivity as the psychological toll of student loan debt contributed to stress as well as improving employer brand in terms of retention and recruitment.
LA TechWatch caught up with Highway Benefits Cofounders Mick MacLaverty and Cory Micheel to learn more about the business, the company’s strategic plans, latest round of funding, which brings the company’s total funding raised to $6.2M, and much, much more…
Who were your investors and how much did you raise?
XYZ Venture Capital led our round with participation from Roger Ferguson Jr. It was our Seed round and we raised a total of $3.1M.
Tell us about your product or service.
With Highway, companies can design and administer custom benefit plans to contribute to their employees’ student loans tax-free. Our platform automatically verifies employee eligibility, loan eligibility, and executes tax-free contributions on a regular basis on behalf of employers.
What inspired the start of Highway Benefits?
When we started Highway, we had first-hand experience with how big of a problem student debt was. We started the company realizing that there was a better way to include multiple stakeholders, employees and employers, to create a solution that not only benefits debt holders but also helps companies in their talent goals.
How is it different?
We’ve put an emphasis on both employer and employee. Our solution is the most turnkey and easiest to onboard for employers. We interviewed over 100 different stakeholders in the people space before starting Highway and a resounding piece of feedback we received was to make sure we created an extremely hands-off product. This is something we’ve kept in mind as we continue to build the company.
What market are you targeting and how big is it?
Unfortunately, the market we’re targeting is so large because the student debt problem is so vast. There are over 46 million people with student loans holding a combined $1.8 trillion in debt. This represents about ⅓ of the workforce. Because of this, our product has garnered attraction from all types of companies.
What’s your business model?
We charge on a per enrolled employee per month basis. This scales up and down across companies of all sizes.
How are you preparing for a potential economic slowdown?
We’re actually seeing a pickup in adoption of student loan repayment as a benefit for a multitude of reasons. While employers certainly think more about every dollar, the impact that this benefit can have on retention and attraction makes it well worth it – not to mention the impact it has on their employees’ lives as well. Additionally, with loan forbearance coming to an end this year, the increased awareness has led to tailwinds for the business.
What was the funding process like?
Raising our seed round was not without difficulty. The fundraising environment has changed a lot over the last couple of years and after many, many conversations with different investors, we were lucky enough to find a partner in XYZ Venture Capital.
What are the biggest challenges that you faced while raising capital?
A short while into our raise, the fundraising environment changed pretty dramatically – massive tech layoffs, volatile market conditions, and the looming fear of a recession made investors more cautious. The change forced us to adapt our fundraising strategy.
What factors about your business led your investors to write the check?
It was a combination of a deep understanding of the benefits space having invested in other companies in the domain previously. Ultimately, they understood the problem we were attacking, how rampant it was and (we would like to think) thought we were the team that could execute.
What are the milestones you plan to achieve in the next six months?
Now that we have fresh capital and our product is in a place that we view as best in class, we are looking to grow as fast as we can. There aren’t necessarily any specific milestones, but we want to get to product market fit. We’ve started to get a better sense of how to methodically generate demand for Highway and will continue to hone in on making our sales machine an even more repeatable process.
Now that we have fresh capital and our product is in a place that we view as best in class, we are looking to grow as fast as we can. There aren’t necessarily any specific milestones, but we want to get to product market fit. We’ve started to get a better sense of how to methodically generate demand for Highway and will continue to hone in on making our sales machine an even more repeatable process.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
If a company is seeking capital, it’s important to understand what milestones they should hit in order to feel confident in fundraising conversations. It’s going to be very important for companies that are and aren’t raising to manage the capital that they do have. At Highway, we’re very conscious of the fact that we need to be good stewards of capital and keep a constant eye on our revenue north star.
Where do you see the company going now over the near term?
For the next few months, our team is really focused on expanding our core offering, while continuing to improve our student loan repayments and educational assistance benefit products. We’re in the midst of a complete redesign and recently launched an app on the Rippling marketplace. We’re exploring more integrations and partnerships for the near future and preparing for major changes that are coming as part of Secure Act 2.0.
What’s your favorite team-building activity in and around LA?
Our favorite team-building activity can actually be done anywhere. In the middle of the pandemic, we did a virtual escape room as a team which was a fantastic team bonding experience. Top Golf in El Segundo is also a great way to have some friendly competition amongst the team.
