Defynance: Tampa startup takes on student loan crisis

On a recent Wednesday, Farrukh Siddiqui told the story of a friend who graduated with a degree in education — and $25,000 in student loans.

She started working, taking time off to have children. The interest kept piling up. She went back to work and lost her job. The meter continued to run. Her $25,000 debt more than tripled, putting her in the same position as 44 million borrowers across the U.S. According to data published by Forbes, these borrowers collectively owe more than $1.5 trillion in student loan debt.

“We want to stop these horror stories,” Siddiqui says, and his company, RedPerit, is poised to do just that. They’re getting ready to launch Defynance, an initiative that addresses student loan refinancing “in a socially responsible way” through income share agreements. The company recently took second place in the Friday Startup Showcase at Startup Week Tampa Bay and plans to start private beta testing its product March 15.

“No one should have to pay a lot more than they borrowed,” Siddiqui says. “Our structure will never let that happen.”

The program works like this. People with existing student loans go through a vetting process and if they’re approved, Defynance, through its investors, will pay off the remainder of their loan. Then, using an algorithm they created, Defynance comes up with several income sharing quote options. People can choose the option that works best for them based on the amount they want to pay and how long they want to spread out their payments.

The main benefit of this structure versus traditional student lending?

“You’re protected if things aren’t going well,” says Siddiqui, noting that in addition to those who’ve been paying off loans for 20 years, many people come out of school and aren’t able to find work right away, or to find jobs that pay high salaries. “If you lose your job, you don’t have to make payments. If your income falls below a certain threshold, you don’t have to make payments.”

While Siddiqui says that a few colleges and universities across the United States are using income share agreements, he doesn’t know of any other companies who are doing what Defynance is doing.

“Long term, we hope this becomes a viable solution that can stand toe-to-toe with the traditional way of borrowing money,” he says.

Following the private beta testing, he plans to do a pilot and ideally launch the product next year. He’s also currently seeking investors to build capital. On a personal level, he’s excited about the prospect of providing an alternative student loan funding source so what happened to his friend doesn’t happen to anyone else.

“For me, I want to see the concept of social responsibility in financial services become rooted in the industry,” he says. “I hope it becomes a common practice.”

If you are interested in participating in the beta testing or the pilot program, or want to find out more information about investment opportunities, click here.