Ed Pacchetti | Dec U.S. Department of Education 2015 FSA Training Conference for Financial Aid Professionals Research & Recommendations to Help Students Succeed Session 47

Agenda 1. Introductions 2. Federal Student Aid Behavioral Science Insights and Borrower Outreach 3. Lumina Foundation Form and Formula: How the Federal Government Distributes Aid to Students 4. Ideas 42 Breaking Behavioral Barriers in the Financial Aid System 2

3 Adopting the insights of behavioral science will help bring our government into the 21st century in a wide range of ways - from delivering services more efficiently and effectively; to accelerating the transition to a clean energy economy; to helping workers find better jobs, gain access to educational opportunity, and lead longer, healthier lives.“ — President Barack Obama, September 15, 2015

The Student Aid Bill of Rights 4 Finding New and Better Ways to Communicate with Student Loan Borrowers. By January 1, 2017, the Secretary shall also, in consultation with the Director of the White House Office of Science and Technology Policy, develop and implement at least five behaviorally designed pilot programs to identify the most effective ways to communicate with borrowers to maximize successful borrower repayment and help reduce delinquency and default and report to the President, through the Director of the Domestic Policy Council, on the status and results of those pilot programs.

Federal Student Aid Borrower Campaigns Over 2 million borrowers were sent s in Fiscal Year 2015 through four behaviorally informed pilots: 1. Borrowers that missed a payment 2. Borrowers in default 3. Borrowers at risk of withdrawing from school 4. Borrowers in income-driven repayment that needed to complete their annual recertification 5

Federal Student Aid 6 Federal Student Aid makes use of data and research such as: Customer segmentation FAFSA completion data Customer surveys of students and borrowers A/B message testing Experimental sites Best practices Behavioral insights, for example…

7 Behavioral Insights and Borrower s

Social and Behavioral Sciences Team 8 Results from Borrower Campaigns To help Federal student-loan borrowers stay on top of their payments, SBST and FSA sent a reminder to over 100,000 borrowers who had missed their first payments. Reminder s to Federal student- loan borrowers who missed their first payment led to a 29 percent increase in the number of borrowers making a payment. To increase awareness of income-driven repayment plans among student loan borrowers, SBST and FSA sent an informational about IDR plans to over 800,000 borrowers who had fallen behind on their payments. The message led to a fourfold increase in applications for IDR plans.

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11 Josh Martin, Senior Associate

Are systems designed to help or hinder? 12

What you were may have been doing last night 13

Why does the house always win? “I’m due for a win” “It has to even out soon” “Ride the hot hand, baby!” “Gambler’s” or “hot hand” fallacy 14

Weird things we all other people do 15

What does the science say? 16

You have one job… Say out loud the color of the shape you see on the screen. 17

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BLUE 26

When might students need to think carefully? FAFSA completion Course registration Choosing among aid options 27

28 Standard Model of Decisions and Actions DecisionActionOutcome I want X So, what should I do? A B I get X Yes No Yes No Don’t know

29 BEHAVIORAL Model of Decisions and Actions DecisionActionOutcome I want X So, what should I do? I get X A B Yes No Is it easy? Will it take a long time? Am I in the right mood? Can I put it off? Yes No Don’t know

30 BEHAVIORAL Model of Decisions and Actions Traditional perspective: – They lack information – They don’t want/need aid – Not enough aid is available Behavioral perspective: – The form is a hassle to fill out – It contains things that make students question whether they’re “right” for college Problem: Students are not applying for financial aid (even though they’re eligible to)

The ideas42 Methodology DEFINE DIAGNOSE DEFINED PROBLEM DESIGN ACTIONABLE BOTTLENECKS TEST SCALABLE INTERVENTION REDEFINE PROBLEM FIND ANOTHER BOTTLENECK STATED PROBLEM DISENTANGLE PRESUMPTIONS CAPACITY AND SCALABILITY INTERVENTION CONCEPT CONTEXT RECONNAISSANCE BEHAVIORAL MAP HYPOTHESIZED BOTTLENECKS POLISH INTERVENTION DETERMINE FEASIBILITY CLARIFY OUTCOMES IDENTIFY SIDE EFFECTS ROBUST EXPERIMENT ideas42partnersequentialiterativeas necessaryconsumer 31

32 Project 1 Increasing FAFSA Applications with Behavioral Design

Problem: Only 18% of students file by the priority deadline; some never do 1. In Priority filers are guaranteed maximum aid package Nationally, priority filers are offered 2x as much aid as those who apply later Nationally, at least 2 million students did not receive grants they qualify for because they did not file the FAFSA 1 33

Behavioral Barriers to Filing Students do not understand what information they need to file the FAFSA Students do not adequately plan to collect the information they’ll need (once they know) Parent information is difficult to obtain and may require significant effort by both student and parent Priority deadline not salient at the right time Inaccurate mental model of who receives financial aid Misperceived social norms of how many students submit the FAFSA

before priority deadline Solution: Behavioral communications to students and parents before deadline Solution 1: student actionSolution 2: parent action Population: 63,000 continuing students Treatment group: 8 behavioral s sent to students – 3 sub-treatments compared BE , short BE e- mail, and peer BE Control group: 1 standard ASU sent to students* Population: 22,000 continuing students with parent e- mails on file Treatment group: 2 behavioral s sent to parents Control group: no communications* *Note this is standard protocol for ASU 35

Solution 1: Facilitating student action 36

Solution 2: Facilitating parent action 37

We increased priority FAFSA filers by as much as 72% **indicates significance at the 95% level ** +38% +52% +72% 38

We increased total FAFSA filings by up to 9% **Indicates significance at the 95% level ** +9% 39

40 Project 2 Choosing courses to stay eligible for financial aid

41 Problem: Choosing Courses at Valencia College We observe: We want: Valencia students register for courses that are not relevant to their major, jeopardizing their federal aid Valencia students to register for more relevant courses, maximizing their aid eligibility

What Leads Students Off Track? Before registering…After registering… 42

Solution 1: Make the Right info Salient clear, easy action steps only the “right” information ideal sequencing of help 43

Solution 2: Improve Feedback with Action Steps clear, easy action steps friendly, personal tone salient consequences 44

Did the solutions improve aid eligibility? s increased aid offered by 3% for all students s increased aid offered by 4% for minority students 3% increase ($150) 4% increase ($182) 45

46 Project 3 Take-up of work-study

Problem: Few eligible students apply for work-study jobs Fall 2014 data 47

Behavioral barriers prevent application Students did not have the correct mental model about work- study jobs Application deadline not salient Hassle factors in the application process prevented action 48

Shape the right mental model of SEED jobs — emphasize financial and academic benefits in clear language Make deadline salient and force a moment of choice Reduce hassle factors with plan-making activity s designed to target barriers

Results: More applicants and applications **significant at the 95% level 1. Not a significant result. A large portion of applications were never reviewed due to organizational constraints Number of Unique Applicants +30% Number of Applications +60% ** Number of Hires 1 55 hires in treatment 50 hires in control < 50

Be a Behavioral Innovator on Your Campus: It’s Easier Than You Think!  platform with standard RTF or html capabilities  Access to parents as well as students  platform with standard RTF or html capabilities  Particularly relevant if using Banner CAPP module  BONUS: ability to adjust online registration form interface FAFSA filing project Course choice project Work-study project  Tracking open and click- through rates for s  Ability to collect parent addresses 51

Contact Us Phil Schuman Director of Financial Literacy Indiana University Ed Pacchetti - Federal Student Aid David Croom - Lumina Nicholas Lee - Gates Foundation Sarah Bauder - Gates Foundation Josh Martin - ideas42 52

QUESTIONS? 53