Wharton FinTech Podcast
00:00:01 · Vaibhav, Matt Palese
[00:00:01] S0: In today's episode, we are joined by Matt Palese, CEO of Earnest. Before stepping into his current role, Matt had spent more than a decade at Navient and Sallie Mae, giving him deep expertise in how the student loan system works from within. Matt brings a unique perspective on the current state in student lending. As defaults are poised to hit record levels in 2026 and major changes reshape federal repayment programs, he understands both the complexity borrowers face and how fintechs can simplify it. At Earnest, Matt oversees operations, risk and lending processes across the entire lending cycle, helping borrowers navigate an increasingly complicated landscape. Hope you enjoy the episode and let's dive in. Hi, Matt. Thank you for joining us. Very glad to have you on Wharton FinTech Podcast and appreciate you taking out time for us. [00:00:53] S1: Yeah. Thanks for having me. Excited to be here. [00:00:55] S0: Absolutely. Let's begin with your journey. You've held significant roles at Navient, Sallie Mae, Wells Fargo before Earnest. What was the turning point that made you want to move to a company focused on helping borrowers refinance? And were there any pivotal moments, perhaps in your own financial life, that informed how you think about student debt?
00:01:16 · Matt Palese
[00:01:16] S1: Yeah. So, you know, I've been in consumer lending my entire career, so call it twenty eight years. You know, seventeen of those years have been in student lending. And to your point, when I joined Sallie Mae in 2009, really everything about the student loan landscape was changing. The FFEL program at the time was ending, and what that meant was effectively all federal loans were moving to the Department of Education. And we were all at the very beginning of what we know now to be sort of a seven year run where interest rates were effectively near 0%. And really because of the financial crisis coming off of the 'twenty eight, 'twenty nine Great Recession, college enrollments skyrocketed. And so student loan debt grew, I think at the time it was about, in 2025 in particular, dollars 400,000,000,000. And that grew to about a trillion dollars by 2012. So there was massive growth in debt. I think combined with those low interest rates, it made it pretty clear to me that there was a pretty big opportunity to help borrowers save on their student loans. What's interesting, there was a parallel there that was happening in my personal life, and to your point around the pivotal moment, that really hit home for me. My wife and I got married in 2013, and what I think every couple did, or does today, and at least did at the time, is that you sat down and you review your finances together, you take a look at your debt obligations. And when we did that, that included her student loans. She was a teacher at the time. And it became very, very clear to me that she didn't have any idea at the time what she had outstanding in terms of her overall student loan debt. She didn't know what her rates were. She didn't know when the due dates were, when her grace period expired. Because she was a teacher, she didn't know whether she would qualify for public student loan forgiveness. It was a complicated decision because we were thinking through how we would manage that debt after we got married, and so we were thinking through and processing the various options that she might be eligible for, such as income driven repayment programs, and as I mentioned earlier, the student loan forgiveness component of it, and we were thinking through that process and whether we got married, whether marriage would have an impact on her ability to qualify for those programs. Right?
00:03:44 · Matt Palese, Vaibhav
And so it was complicated and it was very hard to really figure out how we should be thinking about that in relation to our future. And so for me, that was an extremely pivotal moment, both personally and professionally. I got to see sort of that struggle and experience that struggle firsthand with my wife. And so, you know, that's largely a reason why, and how, to some extent, you know, I show up effectively every single day and how every Earnest employee shows up every single day, really with the mindset of finding ways to extend help to the roughly 45,000,000 people across the country that have student loan debt today. [00:04:24] S0: Thanks for sharing that personal story, Anne. I understand you've been part of this, let's say, two decades of expanding student debt, both inside and outside of The US, but I'm curious why specifically refinancing. I mean, I see the business rationale in that there's employment, there's perhaps lower risk, more predictability, but would love to hear from you.
00:04:48 · Matt Palese
[00:04:48] S1: Yeah. So refinancing as an asset class, I think if you were to step back today and just take a look at the overall market, today it's $1,800,000,000,000 The problem just continues to grow and there continues to be a huge and massive opportunity to help customers pay off their loans faster and as a result of that save a meaningful amount of money. To put that into context, we believe there's about $100,000,000 of student loan debt today that qualifies and would benefit from refinancing. But if you look back last year, only about $10,000,000,000 actually took action or $10,000,000,000 of debt actually refinanced. So call it 10% of that actually took advantage of the option. And so the fundamental problem here that we're trying to solve is just figuring out how we reach more people who are eligible to refinance. And so my ultimate goal is to try to get that 10% number a lot higher. And I want to see that 1,800,000,000,000 in overall student debt come down. I think the other component here is, when you zoom out a little bit and you think about, well, how do we view success? From my vantage point, it's basically helping them get out of student loan debt so they can really live the life they envision. That's our mission. It's effectively on the proverbial wall, right? But the reality is that's obviously a lot easier said than done, and how you get there looks different for everyone. I think for some people it might mean keeping their payment the same or even increasing it slightly so they can pay off the loan significantly faster. And then for other people it might mean reducing their monthly payment by extending their loan term. It's all circumstantial and it really depends on the customer, but the way that Earnest looks to enable that is to really offer the most flexible options in the simplest and most automated way, while sort of combining that with best in class customer support to really help guide customers and borrowers through these complicated decisions.
00:06:49 · Vaibhav, Matt Palese
[00:06:49] S0: Understood. And I understand that being flexible for the first time borrowers or for those refinancing this loan is the key point here and is something you're absolutely focused on. I'm also curious to understand a little more about the business model here. Are you essentially making money through lending margin? What are your funding sources look like? Or perhaps are there any other revenue streams as well, like data partnerships, etcetera? [00:07:15] S1: Yeah, so at its core, I mean, we're a lending business, so we make money on the spread between our cost of funds and the rate we offer our borrowers. That is fundamentally the model here. I think the key call out is that we don't charge fees of any kind. What that really means in practice is that when you apply for or take a loan out with Earnest, there are literally no origination fees, no application fees, no late fees, no insufficient check fees if a check happens to get returned for some various reason, or like hardship enrollment fees. And so if a borrower hits a snag or goes through a rough patch and needs help, we have programs that allow them to help them get through that stage. And there's no fees that come along with any of those programs either. The problem we are trying to solve is helping borrowers get out of student loan debt faster. Right? And so piling on fees cuts directly against solving that problem and really contradicts our overall mission at Earnest.
00:07:15 · Matt Palese, Vaibhav
[00:07:15] S1: Yeah, so at its core, I mean, we're a lending business, so we make money on the spread between our cost of funds and the rate we offer our borrowers. That is fundamentally the model here. I think the key call out is that we don't charge fees of any kind. What that really means in practice is that when you apply for or take a loan out with Earnest, there are literally no origination fees, no application fees, no late fees, no insufficient check fees if a check happens to get returned for some various reason, or like hardship enrollment fees. And so if a borrower hits a snag or goes through a rough patch and needs help, we have programs that allow them to help them get through that stage. And there's no fees that come along with any of those programs either. The problem we are trying to solve is helping borrowers get out of student loan debt faster. Right? And so piling on fees cuts directly against solving that problem and really contradicts our overall mission at Earnest. [00:08:17] S0: Yeah. I'm also curious to understand how big is your loan portfolio today? And I can only imagine managing a big loan portfolio at a pretty large scale is quite operationally intensive and the infrastructure behind the scenes would be equally important. How much of that is in house, outsourced to partners or to other service providers perhaps? Curious And to understand, what does your tech stack and or investment look like?