I believe one of the most important ideas in understanding debt is what we call “Layers of Risk”. One layer that I have not taken the time to fully consider was brought to my attention in an article today. That layer of risk is student borrowers with children, and specifically single parents:
- Nearly 50% of undergrad students borrowers defaulted
- Of those, 70% were single parents
- 10% of borrowers are single parents, but they represent 40% of all defaults
These stats also include additional factors and layers of risk. For example, as the article points out if you’re a parent of a child under 3, a person of color, or enrolled in a for-profit school your default rates are even higher.
Additionally, many of these defaulted loans are for students that were unable to complete their degree so they are stuck with a non-bankruptable debt and no degree with which to increase their earning potential.
Any system that disproportionately penalizes the most vulnerable needs to be reformed.