What are the key student loan consumer segments ?
Writing last minute essays, dreading 9am lectures and student loans are all part of the first rite of passage into adulthood for many in the US. Yet, only the third item sticks with many after college, constantly in the back of their minds, as they work while being aware that they still have quite a few years (maybe decades) of loans ahead to work off. Barack and Michelle Obama, for instance, only paid off their student loans in their 40’s.
The Quilt.AI Research Methodology
To better understand the student segments and what their concerns and aspirations are, we
analysed several posts and extracted around 5500 social media posts from the official pages and accounts of SoFi (an American personal finance company offering student loans) using our Culture AI. Through this, we identified five key segments.
The Newbie: Fresh-faced, uncertain, in need of a crash course
Just out of school and eager to leave their homes for the first time, they see the act of going to university as liberation. By going to uni, perhaps in a different city, they’ll finally taste ‘‘freedom’’.
Newbies tend to not be very discerning when it comes to ‘adulting’, especially when it comes to financial planning. They will need to be introduced to their brand new reality, and receive this influx of new information in an accessible manner. As they would likely be encountering this information for the first time, a lot would be unfamiliar to them. Brands playing in this space would need to be careful not to trigger feelings of overwhelm when crafting content for the Newbie segment.
Financially speaking, these students want to get into college and get a loan with reasonable interest rates, but since they’re new to the world of student loans and have limited knowledge on this topic, they are stepping gingerly, feeling apprehensive about potentially running into debt-related scams, or not getting money after loan approval, and a potential rise in interest rates.
In framing their offering, businesses presenting an approachable brand personality would win their support. Brands need to foreground affordability, offer an easy-to-understand setup and service to attract newbies’ attention.
The Diligent: On top of things and prone to worrying
They’re graduates who want to get rid of debt that was accumulated through their years in education.
They hope to pay back the loans fast, take responsibility for their own loans (instead of pushing this burden to their parents), and maintain decent finances. For them, it all comes down to focusing on sorting out the current loans and improving their situation. They clearly understand the weight of student loans responsibility. Their problem isn’t figuring out the basics of student loans, but dealing with the burden caused by it.
They’re a step ahead of the newbies, with moderate knowledge about student loans (perhaps because they come from households where their parents have frequently talked about this topic). They’re searching for guidance to close the loan as soon as possible.
Unlike the other categories, they’re scared of their own potential future decisions. They fear they won’t be able to manage the loan if they end up dropping out of college, hence facing struggles to make enough money to pay back the loan. Like Newbies, the rise in interest rates makes them agitated.
For finance companies to appeal to this consumer segment, aside from low-interest rates, creating an offering of all-round support would be ideal. Training programs, workshops, events and custom consultations would assuage the fears of the Diligent folk prone to worrying. Brands should inspire confidence, helping these consumers feel more assured when it comes to finance matters and confident to manage them.
The Aspiring: Ambitious and keen to maximize their options to the fullest
Stressed with trying to come up with strategies in the present to figure out the best ways to pay back the debt, this category of people are highly conscious, highly knowledgeable loan receivers.
Their interests can be regarded as more expensive and ‘‘sophisticated’’ than the ones mentioned by previous segments, finding the idea of a new car, new house, shopping and plane travels appealing. As such, they spend their time figuring out how to optimize their various loan options, so they can pursue higher studies, or buy a car, house, or start a family.
With many simultaneously occurring plans for their future, they feel concerned about not being able to secure another loan. Like the ‘‘Diligents’’ and ‘‘Newbies’’, the rise in interest rates worries them badly.
To catch this segment’s attention, companies providing cost-competitive offers have to frame their offering from a big-picture view, showing how their products fit into a person’s monthly budget containing other loans and expenses, projections on cost-savings and more.
The Mature: Experienced, knowledgeable, eager to try new things
People in this category are financially-savvy work folks who lead economically balanced lives. They are experienced and can be considered good strategists, open to experimenting with different types of investment.
Their keenness to get involved in more sophisticated investment instruments like cryptocurrency and stocks indicates open-mindedness, willingness to try newer offerings, and an ability to stomach high-risk, high-volatility climates.
They dread a potential fall in stock price, implementation of new government policies (like tax implications, restrictions), and banning digital currency (especially because that can stop them getting involved in the advanced mode of investment like bitcoin).
Companies looking to target this segment can attract them with more innovative, less mainstream plan options and packages. In terms of brand communications, adding a touch more of complexity and detail in describing the products offered would serve to present authority and expertise, fitting this segment’s more sophisticated knowledge level.
The Desperate: High stress levels, anxieties and eager for a solution
Burdened with the inability to address their loans, they are on the lookout for a miracle to clear them of the obligation. The next best thing to them are loan extensions and offers to lead a loan-free life.
Even though customers under this category know the end-to-end loan procedures, they are at a high-level risk and have no hope. They face challenges like unemployment, interest rates hike, new loan disapproval due to minimal savings, and low credit scores.
To provide a suitable service for the ‘‘desperates’’, businesses can consider offering inspiring ‘success stories’ podcasts and events, and case studies of how clients in similar circumstances successfully climbed their way out, in order to inspire this segment to find ways to minimise or even get rid of their financial struggle.
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