It's simple. Buy stuff with this new debit card and you'll reduce your student loan debt.
The card offers 1% cash back on all your purchases and the money will automatically transfer to your student loans.
Startup Gradifi and online bank Radius have partnered to offer the new MasterCard debit card. It will become available to Gradifi members in September and to the general public a month later.
Gradifi helps companies offer workers extra money to use towards paying down their student loans. It's a workplace benefit that's growing in popularity.
One of its biggest customers, PwC, rolled out the program earlier this year. PwC offers employees $1,200 annually to help pay down their student loans, for up to six years. The funds are distributed directly to workers' student loans through Gradifi's platform.
Employees signing up have even bigger student loan balances than DeMello had expected. While student borrowers across the country leave school with an average of $28,950 in debt, those signing up with Gradifi have an average of $43,000.
"There are a lot of student loans out there. More than we ever thought," DeMello said.
The debit card's cash-back program won't solve the problem, but when it comes to paying down your student loans, every little bit does help. Someone who leaves undergrad with $43,000 in debt is expected to pay at least $400 a month over 10 years, according to the standard terms of a federal loan and assuming the current interest rate of 4.29%.
If Gradifi is already transferring funds from your employer to your loans, the cash-back transfer should be seamless. Even if your company is not a Gradifi customer, you'll be able to sign up for an account before the debit card becomes available this fall -- making the transfer easy.
If you don't want to wait that long, you can chip away at your student loan bill using almost any cash back card and setting aside that money for your bill. And if your loans are owned by Sallie Mae, they also have a credit card that offers cash back rewards that will be applied directly to your loan bill.