By Nataly Sabharwal, Collaborative Lead, and Sarah Austrin-Willis, Senior Director, Financial Health Network
As the pandemic was initially unfolding and unemployment rates in the U.S. made headlines, research showed that Americans facing both unemployment and student loan debt experienced serious risks to their financial health. One in five unemployed U.S. adults report that they or someone in their household has a student loan, and the 45 million Americans with student debt owe $33,000 on average. The problem is especially acute among Black and Latinx borrowers. These groups have some of the highest default rates and unemployment rates in the U.S., with 21% of Black borrowers and 16% of Latinx borrowers behind on their payments, compared with 6% of White borrowers.
Unemployment and Student Loans: A Worsening Crisis
The collective impact of these two crises threatened to come to a head in August when expanded unemployment benefits were due to expire. It is now at risk of worsening at the end of January 2021, when student loan forbearance and two federal programs to support unemployed workers currently scheduled to end.
The Financial Solutions Lab’s 2020 Collaborative is focused on finding a solution to this challenge. The Collaborative is our newest initiative, designed to bring together nonprofits, fintechs, government entities, think tanks, financial institutions, and diverse partners to work together on solutions that tackle consumer challenges with few existing solutions in the marketplace. For its inaugural project, the Collaborative seeded a data-driven pilot program to address challenges faced by unemployed individuals who also carry student loan debt, building on our support for worker and student health throughout the year.
Following stakeholder outreach and a design sprint with 39 participants from 21 organizations to identify consumer pain points and map collaboration opportunities, the pilot solution used data, messaging, and personalized support to reach out to vulnerable borrowers. Given the urgency of the crisis, speed of delivery was an important consideration, so the pilot focused on the delivery of an existing government intervention able to pause or minimize student debt payments for borrowers – income-driven repayment (IDR) plans. These plans can be especially impactful for borrowers experiencing income loss and unemployment. The pilot program created public resources that other cities, nonprofits, and fintechs can replicate and leverage to reach borrowers at scale. The program also reviewed structural changes that could benefit large numbers of borrowers beyond the pilot program. Reach out to our team for more information on these policy recommendations or stay tuned for additional content from the Collaborative.
Driving Innovation Through Collaboration
To run the pilot, the Collaborative awarded a grant to the Student Borrower Protection Center (SBPC) in collaboration with Student Debt Crisis (SDC) and other partners. These organizations worked together to test a data-driven approach for identifying and then reaching vulnerable borrowers with relevant information on IDR plans:
1. Identifying Borrowers: SBPC, working with the city of San Francisco’s Office of Financial Empowerment (SF OFE), developed an interactive dashboard to identify and target student borrowers who would benefit from IDR plans, particularly Black and Latinx borrowers. By bringing together data on borrower distress, unemployment, demographics, and economic status, SBPC and SF OFE identified over 280,000 borrowers in the Bay Area who are eligible for IDR plans. Many of these borrowers were concentrated in some of the Bay Area’s poorest communities and those with higher percentages of Black and Latinx residents. SF OFE is now working to identify a technology platform to roll out an intervention in the neediest of these communities.
2. Reaching Borrowers: SDC developed relevant content for borrowers and organizations that can help reach borrowers, then tested content delivery methods and messaging through trusted nonprofit partners NextGen and Young Invincibles. SDC also worked with social impact technology startup Savi to deploy an online income-driven repayment enrollment tool to eligible borrowers. These outreach efforts resulted in:
- Reaching 60,000-70,000 borrowers via email
- More than 7,000 registrations for student loan repayment workshops
- 460 registrations for the Savi tool, with nearly $20 million total debt managed and more than $1,000 average monthly savings for borrowers
SBPC is now working with other cities interested in building local dashboards and exploring how this data-driven approach can apply to other vulnerable populations of student borrowers. SDC’s resources for borrowers are available for organizations to share with their employees and other stakeholders. SDC is also recruiting additional partners to target Black and Latinx borrowers nationally with relevant content.
SBPC and SDC’s materials are designed to be tools and resources for government entities and organizations working in the student debt space to help consumers navigate new financial challenges brought on by the pandemic and resulting unemployment crisis. We encourage you to explore this content and share it with your networks to reach more borrowers.
- SBPC’s Bay Area Dashboard and Methodology
- SDC Resource Center for Borrowers
- SDC Tools and Templates for Affiliates
Please contact firstname.lastname@example.org if you are interested in:
- Replicating the dashboard developed by SPBC in your city or state
- Reaching borrowers with the resources developed by SDC through your own organization or by connecting to national nonprofits that can help reach borrowers at scale
- Learning more about the Financial Solutions Lab’s ecosystem in the student and worker space