Frank, which uses machine learning to give students access to financial aid, raises $5M

Steven Loeb · April 13, 2020 · Short URL:

The company uses student data to find the best ways to help them pay for school

It's been a while since I have to file for financial aid for college, but my memories of that process are not particularly happy ones. My mother was thankfully pretty adept at it, having helped my sister with it only  a few years before, but I don't remember getting any other help with filling out those forms and knowing which scholarships to apply to.

Students need help with this process, and that's where Frank comes in. The company takes data about students, including their financial situation, the demographics and their preferred schools, and automatically finds ways to help them get aid to attend school.

It's a startup that founder and CEO Charlie Javice describes as "software that’s similar to TurboTax but for financial aid."

"Our goal really is to help students better afford college. We do that at the very beginning of the process because our belief is similar to preventative health: if you get there early with personal finance, hopefully it can change the trajectory and course of somebody’s life so they don't need to have 30 years of debt. That's why we started Frank," she said.

On Friday, the company revealed that it raised a $5 million round of funding from Chegg, an  edtech company provides things like digital and physical textbook rentals and online tutoring, along with new investor GingerBread Capital and previously investors Aleph and Marc Rowan. The company has now raised over $20 million. 

Along with the investment, Heather Morris, Chief Strategy Officer at Chegg, is joining the board of directors at Frank.

"Heather is great and she’ll bring operational experience. She’s done a lot of M&A work and she basically runs all of strategy at Chegg," said Javice.

"We do a lot of data exchange with Chegg, while thinking about how financial aid data can help with student college search, so that students can better understand the ROI on their education. We're always thinking of different ways of how we can work together to serve Chegg's eight million students."

To use Frank, students just need to snap a picture of their tax returns, and then add the schools they want to go to, with the software helping to recommend some affordable options for them in that process. The company then submits the applications to the government, which then opens up help when it comes to things like personalized curated scholarships, state aid, different types of workforce grants, as well as institutional aids and discounts that the company helps students with through what’s called an aid appeal. 

"Imagine us as an aggregator of all types of money when it comes to school for students," said Javice.

The company takes a lot of its data from the student themselves when they fill out their Free Application for Federal Student Aid (FAFSA), a form that 20 million people fill out every year. That gives Frank access to things like their academic, financial and demographic data. The company also works with the National Student Clearinghouse for data on student retention, and then it also also has public datasets from College Scorecard, as well as data from partner schools who give it data feedback on their student cohorts. Frank then takes all of that information and uses it to create datasets for how best to help students with aid.

"It’s based on both machine learning, because every student who adds their preferences influences where we would recommend the next student, but it’s also built on where students can achieve the best outcomes and values for their education, determined mostly by their interests and location, as well as cohort default rate and graduation rate, which are key drivers in terms of student success," Javice explained.

The typical person using Frank right now isn't a 17 year old in high school looking to go to college, but rather one of the 70 percent of students attending college right now who are over the age of 25, aka adult learners.

"They’re independent students who don’t get any help from their parents, they aren't in high school so they don’t have any counselors, and that’s the primary demographic that we serve and it’s reflected in our numbers too," said Javice, noting that 68 percent of the people Frank helps are women, over 40 percent are minorities, close to 50 percent are first generation college students, and 80 percent of its base earn less than $40,000 a year.

It is especially important to help adult learners in times like these, Javice explained, when there's mass unemployment and going back to school is actually a way for people to stay afloat. 

"You’re talking about the most valuable demographics when it comes to schools because the federal government subsidizes all these lower income, or lower middle income, families when they go to college. They basically get a full ride, which includes grants and subsidized loans and it will cover tuition and living expenses, which in today’s age, specifically with unemployment soaring, it is the most amount of federal funding or aid," she explained.

"You can receive up to $36,000 of grant money and that goes toward living expenses and tuition. It is much better than the one time $1,200 check that American families will receive. That’s why higher education is typically counter cyclical, because you have a lot of people, as they lose their jobs, the only way to live through this and pay their rent is to go back to school."

In terms of ROI, Frank typically helps students get an average of about $28,000 a year through FAFSA, and then another $7,000 a year through its aid appeal process, in which it helps students explain their family situation or potentially have better offers from other schools. In all, Frank estimates that it has helped close to half a million students at this point get a total of $12 to $15 billion in aid. 

The company plans to use the new funding it has raised to be profitable, said Javice, as the current environment makes it unclear "when investors will put money back out to work."

"We feel extremely grateful to have closed this round when we did," she said, explaining that the stock market crashed literally the day before Frank closed the round, meaning that it lost some of its promised funding.

"We’re excited to fight another day because in this environment you’re just really happy to not need to fire people." 

The goal at Frank is to become "a trusted financial brand for students that truly meets their needs and serves them in an ethical way, without screwing them," Javice told me.

"We tell schools, ‘We don't build anything for you, we only build things for students, so if happen to like what we build, we’re happy to plug into what you do. If not, we’re probably not the right partner for you.’ So, we have a very firm stance of being student-first, which probably reflects our mission alignment with Chegg." 

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