📚 SURVEY: The state of student debt

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The big idea
student debt

The $1.6T student debt problem

More than 40m Americans have student loans, owing an average of $37k per borrower — or a total of $1.6T, per new stats from the Department of Education.

During the pandemic, Americans with federal student loans have been able to avoid making monthly payments and accruing interest.

But that freeze is set to end on September 30.

In anticipation of potential policy changes, we surveyed 384 readers of The Hustle who reported taking on student loans at some point.

Among the results:

Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA), says loans have caused many borrowers to delay homeownership, marriage, children, and retirement. (Some people even worry about marrying people with debt.)

For some borrowers, student debt lasts for decades…

In the early 2000s, many borrowers consolidated loans to take advantage of low interest rates. Many also signed up for income-based repayment plans that match their payments to their salaries, but can extend terms by 20+ years.

Mayotte spends a lot of time on Reddit forums, where many people say they would prefer a permanent reduction in interest — which can be 8% or more for some borrowers — over student loan forgiveness.

“There’s an emotional toll in making payments every month and still seeing your balance go up,” she says.

The freeze has helped

One Hustle reader who couldn’t save before banked $7k, while another paid down $18k on their principal. Another said they finally have a savings account and “feel relatively prepared if a larger expense were to come up.”

Others are less well-off: “With interest being put on hold, I’ve finally been able to put a dent in my loan while also saving a couple hundred for myself. My loan payments are something I dread and I am close to just giving up on them altogether.”

Mayotte is worried we’ll see more delinquencies. Her advice?

  1. “The faster you pay the loans off — unless you’re pursuing a forgiveness program — the cheaper the loans are gonna be in the long run.” And there’s never a prepayment penalty.
  2. Get in the habit of regularly reevaluating how you pay your student loans.
  3. If you think you might need a lower repayment option or advice, start lining things up in August and be prepared for longer wait times.
  4. If you need help, ask. But don’t pay for it. Scams are abundant, but the Department of Education website and groups like TISLA are available to help for free.
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SNIPPETS

Viral tweets can be great or terrible. Twitter may roll out an “unmention” feature to duck out of unwanted or abusive convos. #privacy

Luminar is testing its lidar — like radar, but using light from a laser — in self-driving cars that, hopefully, use the tech to never crash. #emerging-tech

NASA contemplates a research telescope on the far — and much quieter — side of the moon to learn about the universe’s first stars and black holes. #emerging-tech

Scythe Robotics’ self-driving lawn mower just raised $18.6m. Better yet? It’s electric and zero emission. #clean-energy

Move over, Facebook groups? Social networking platform IRL — currently hosting ~12m users — raised $170m, bringing its value to ~$1B. #big-tech

Do Google and Apple have a duopoly on smartphones? That’s what the UK’s Competition and Markets Authority wants to know. #big-tech

Boxed — the startup that sells stuff like paper towels and snacks in bulk — is going public in a SPAC deal worth ~$900m. #ecommerce-retail

Sir Tim Berners-Lee invented the World Wide Web in 1989. Starting June 23, Sotheby’s will auction off the source code as an NFT. #fintech-cryptocurrency

European Tech
Klarna app

Fintech Klarna becomes Europe’s most valuable startup, worth $45B+

Last week, Swedish fintech wunderkind Klarna announced a monster $639m funding round, bringing its valuation to a Scrooge McDuck-sized $45.6B and cementing its status as Europe’s biggest startup.

The round was led by SoftBank’s Vision Fund 2 (AKA Masayoshi’s moneybag), marking its value up 4x from just 8 months ago.

The king of ‘Buy Now, Pay Later’ (BNPL)

Klarna provides retail customers with an interest-free finance option to make large purchases — BNPL services occupy a space between traditional layaway and purchasing with a credit card.

In an exclusive interview with TechCrunch, Klarna’s CEO and founder Sebastian Siemiatkowski points to the company’s growth in the US as a driver of Klarna’s recent success.

The stats don’t lie:

  • 18m+ US customers are using Klarna
  • 24 of the top 100 US retailers offer financing through Klarna
  • 90m+ global active users, w/ 2m+ daily transactions processed
  • In 2020, Klarna processed $53B in volume, compared to competitor Affirm’s (womp womp womp) $8B

Rumors are circulating that Klarna may be preparing for a public listing within the year.

But is BNPL bad for consumers?

Recent reports from Citizens Advice highlight the risk of BNPL present to general consumers. BNPL companies use what are called “soft” credit checks, which do not always uncover other outstanding debt.

Citizens Advice found that 4 in 10 of consumers who used BNPL in the last 12 months are now struggling to make payments.

Which raises the question that may cloud Klarna’s prospects: Whose responsibility is it? The consumers’? Or the company issuing credit?

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China Tech
DiDi vehicle

China’s Uber, DiDi, files its US IPO

DiDi — the ride-sharing company that holds 90% of China’s market share — filed for its US IPO last week. Its valuation could hit $70B+, per The Wall Street Journal.

Known as China’s Uber…

… DiDi was founded in 2012, then merged with competitor Kuaidi in 2015. A year later, it merged with Uber China in exchange for a stake in DiDi, which Bloomberg pegs at 12.8%.

DiDi now operates in 15 countries — including Mexico, Brazil, Australia, and recently South Africa — but only ~12% of its active users are outside of China, per Protocol.

DiDi may not ever be profitable

Though DiDi has lost money in the last several years — including $1.6B last year — it turned a profit of ~$30m in the first 3 months of 2021.

Still, it noted to investors that the company “may not be able to achieve or maintain profitability in the future.” Just like Lyft. And Uber.

Also not unlike US ride-sharing companies, DiDi has had several controversies, including allegations of high driver-commission fees and a report that suggested iPhone users were charged more.

Far worse, in 2018, DiDi suspended its carpooling service Hitch after 2 female passengers on 2 separate occasions were murdered.

DiDi plans to spend the net profits of its offering like this:

  • ~30% on expanding globally
  • ~30% on shared mobility, EV, and autonomous driving tech
  • ~20% on developing new products and expanding existing offerings
  • The rest on “general corporate purposes”

And this may be obvious, but DiDi’s ticker will be… $DIDI.

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From $600 in startup costs to $15k a month in revenue

And a very simple business model. That’s how Quinn Miller built a successful vending machine business in 10 months with 65% profit margins.

And how big can the business become?

Quinn met someone who runs a vending machine business that makes $5-$10m in revenue with 50% profit margins off 1.6k machines.

On episode #187 of My First Million, Sam and Shaan break down how you can successfully replicate this business.

🎧 Listen here →
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Athlete of the day
Cristiano Ronaldo holding a Coke bottle

Cristiano Ronaldo telling people to drink water (Source: Insider)

Soccer superstar Cristiano Ronaldo removed 2 bottles of Coca-Cola during a press conference on Monday and said “drink water” in Spanish.

The episode happened for a UEFA Euro 2020 event (the confusing date in the pic is because the tournament was postponed a year by the pandemic).

Ronaldo is known for his insane dedication to fitness and — according to Insider — once said he gets “pissed” when he sees his children drink Coca-Cola.

As is always the case on the internet, someone had a negative spin: sports betting site Paddy Power tweeted a photo of Ronaldo in a KFC ad and quipped: “[He] doesn’t mind big buckets of fried chicken, though.”

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