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For our thesis in Design for Social Innovation at SVA, we are looking into how borrowers can develop a sustainable financial practice so that they do not default on their student debt. This presentation walks our audience through the larger issue, how we plan to scope it, some unmet needs and assumptions we have identified, and finally our plan moving forward as we get closer to designing a sustainable intervention. Please see our presentation notes and more information on our thesis at studentdebtbehavior.tumblr.com
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Demystifying Default
Laura Kadamus Rhea Rakshit
October 13, 2014
Unpacking Student Loan Behavior and Default in
the United States
40 million
$1.2 trillionstudent loan borrowers share a debt burden of
14% of them are expected to default.That’s 5.6 million borrowers, approximately
the total population of Denmark.
Why is default a problem?
It’s a problem for the borrower
stress and anxiety
credit score ruined
taxes withheld
wages garnished
It’s a problem for the economy
rising inequality
public interest job market
SME market
housing market
Why!Federal Loans?
Why are so many students
defaulting?
Here’s what we heard.
“Changing plans is so confusing - I never even bothered.”
“There is no communication. They don’t make the process easy. I learned everything on
my own.”
“I didn’t have a plan. I have no clue how loans are structured.”
“I don’t tell people my business. Student loan
payments should have been the first thing on my mind, I
take full responsibility.”
“I was so stupid to have borrowed so much money, exactly the kind of stupid teenager they prey on.”
Rob, Delinquent!Associates
Evan, Forbearance!Bachelors + Masters
Ari, Repayment!Bachelors!
Lela, Default!Drop Out
Francesca, Repayment!Bachelors
“Financial stress is rarely not somewhere in the picture. Most students don’t come in until a major incident.”Christine, Student Health,!SVA
“Low income students don’t have a good example on how to navigate the loan process.
Lynn, Debt Advisor!SVA
Joanne, Partner Engagement, ASA
Jonathan, Campus Engagement & Education Consultant. ASA
Michael, Operations Analyst, LearnVest Inc
“Small goals allow you not to [get overwhelmed] think
about the big picture.”
“They are not thinking about it until it’s down to the wire.”
Patty, Career Development, SVA
“[Students] need to track how much they’re borrowing while they’re in school so there are no surprises.”
“Borrowers need to know there are options out there. It’s in the best interest of all stakeholders for borrowers to be in a [suitable] repayment plan.”
Here’s what we learned.
Awareness + Accountability
Low Financial Literacy
Awareness
Lack of Clarity + Financial Jargon
Awareness
Behavioral Biases
Accountability
Accurate Profile of a Defaulter
Accountability
How might we encourage a sustainable financial practice
among recent college graduates, so that they do not default on their student loans?
HypothesisTheory of Change
Why recent college graduates?
AssumptionsPeople want to deal with their finances but they
don’t know how
Breaking down the decision making process makes decisions less intimidating
Obligation Ownership
Next StepsPrototyping and Testing:
Competitive Analysis
Financial Literacy Formats Collaborative Learning Methods More User Research
People and Organizations Reframing Interactions with Money, ex. Reciprociti People and Organizations Making Painful “Tasks” Easier, ex. Commonbond
Thanks!
