12 Aug Profiles in Deliquency
Submitted by: Tanya Tanaro, Manager, Higher Education Partnerships, American Student Assistance
In the quest to achieve the American Dream, an education is one of the most important tools a person can acquire. Ironically, the cost of getting that education can create as many obstacles as it does opportunities.
Student debt in this country has reached an all-time high. Growing steadily over the past decade, the nation’s $1-Trillion student debt burden has financial implications that extend far beyond student borrowers. As an entire generation’s discretionary spending virtually disappears, it causes an economic ripple effect impacting families, government and municipalities, and businesses alike.
The reality of student debt is that not all delinquent borrowers are the same. The work of American Student Assistance® (ASA), with over a million student borrowers, has revealed that people who are behind on their loan repayments often fall into one of six different categories. Each type of student borrower comes with a unique set of circumstances and challenges—as well as unique opportunities to steer them back onto a path to successful repayment.
Who are the Hand Raisers?
This is the type of borrower who would be mentioned in sentences that begin, “In a perfect world…” Hand Raisers are aware of their debt situation, but they are not entirely sure of their repayment details and obligations. Upon completion of their degree, Hand Raisers are ready and willing to begin all the necessary preparations to ensure their future success.
Who are the Blindsided?
The Blindsided don’t lack motivation. They lack awareness. Like all graduates, they’re thrust into a world of job hunting, moving, adjusting to the “real world” beyond college, and of course, debt repayment. They may not know or fully understand the repercussions that delinquency or default can have on their long-term goals—and often they do not know where to begin, or how to manage their loan repayment.
Who are the Overwhelmed?
Student debt is a perpetual game of catch-up then fall-behind for the Overwhelmed. They will slip from 30 to 60 to 90 days delinquent, then catch up, only to slip behind once again. Due to a variety of factors—including unemployment and underemployment—their student loan repayment has not been a priority.
Who are the Small Debtors?
As a whole, the Small Debtors make up one of the larger groups of student borrowers. Their loans may represent only one or two semesters at college, with student loan balances totaling as little as $1,000. Small Debtors determined early on that they were not academically or socially prepared for college, and withdrew. But experience has shown that the earlier a student withdraws, the higher their risk of delinquency.
Who are the Running Scared?
Hopeless. That’s the overwhelming emotion felt by many of the Running Scared. They consider their debt as an insurmountable obstacle. They don’t believe that there is a solution to their problem, so they are unwilling to even broach the subject at all. Consequently, they’re ignoring the warning signs of credit damage, collections or even potential default.
Who are the Cliff Dwellers?
The Cliff Dwellers are, quite literally, a group of borrowers living on the edge of default. They’ve gone beyond 30, 60, and 90-days delinquent and are rapidly approaching 270 days past due. They are on the brink of disaster. Cliff Dwellers may or may not know how close they are to default; most certainly they do not know how quickly their options vanish once they go over the default cliff.