1. One Letter, Big Results: Using Debt Letters to Encourage Smart Borrowing
Tami Gilbeaux
Strategic Business Director

2. Source: Are College Students Borrowing Blindly? Brookings Institution
The Struggle is Real
48%
of student borrowers either don’t know or incorrectly estimate the amount they have borrowed
28%
incorrectly believe they have no federal loans at all.
Source: Are College Students Borrowing Blindly? Brookings Institution
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3. Debt Letters Defined
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4. Debt Letters = Loan Summaries
Elements
Aggregate Loan Amounts
Institutional
Comprehensive
Estimated Repayment Amount
Include interest rate and repayment plan
Loan Limits
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5. Well, no. But, there is some science to them.
Are debt letters magic?
Well, no. But, there is some science to them.
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6. Debt Letters: Why They Resonate
JIT Learning
Relevant
Timely
Debt Letters: Why They Resonate
Behavioral Economics
Irrational choices
Muddled by length, complexity, experience or timing
Nudge Theory
Point people in the right direction
Has to be easy
Can include a call to action
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7. Three Schools, Three Studies
Do Debt Letters Work?
Three Schools, Three Studies
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8. University of Missouri
Case Study
Timing is everything
Research Paper
University of Missouri
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9. University of Missouri
Method
Letters
Aggregate borrowing
Estimated repayment amounts
Average borrowing of peers
How to contact the FAO
March letter coincided with registration and loan acceptance choices for following year
University of Missouri
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10. University of Missouri
Results
Did not significantly reduce borrowing
Exception: low GPAs and high aggregate balance
Increased contact with FAO
2% more likely to seek assistance
3.4% more likely if nearing loan limits
University of Missouri
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11. University of Missouri
Takeaways
May need additional support
Reduced borrowing may not be top priority
Increased FAO contact is a positive
…there is evidence that the letter induced a positive outcome, namely information seeking among students. There is value to encouraging a more informed student body, even if average short-term borrowing behavior does not demonstrably change. For example, informed students are more likely to actively choose an appropriate repayment plan and engage with their loan servicer, both of which may help students stay current on their educational debt post-college.
Source: An Experiment on Information Use in College Student Loan Decisions. R. Darolia
University of Missouri
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12. Montana State University
Case Study
High-Risk intervention
Research Paper
Montana State University
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13. Montana State University
Method
Letters
Targeted students with slow academic progress and higher-than-average borrowing amounts
Default warning
Block tuition
Gift cards for counseling
Montana State University
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14. Montana State University
Results
Borrowed an average of 1/3 less ($1,360)
Increased GPA and credits completed
Increased retention rates
2% points more likely to switch to higher-paying major
Montana State University
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15. Montana State University
Takeaways
Additional academic information contributed to positive academic outcomes
Early intervention is key
Montana State University
Source: Does Salient Financial Information Affect Academic Performance and Borrowing Behavior Among College Students? Federal Reserve Bank of Philadelphia
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16. Case Study Holistic approach Program Information http://bit.ly/2CHmqzb
Indiana University
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17. Method Letters Aggregate borrowing Estimated repayment amounts
Additional school resources
Indiana University
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18. Results
23%
is the percentage by which student borrowing has decreased during the first four years ($114 million).
Indiana University
Source: Indiana University initiatives continue to pay off in reduced student borrowing. IU Newsroom
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19. Three Schools, Three Studies
What can we learn?
Define your outcomes
Reduced borrowing?
Increased GPA?
Measure
Control groups?
Previous years?
Support
Online resources?
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20. Debt Letters and Financial Education
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21. Staff and Students want Financial Education
99%
of college students indicate that personal financial management is a critical skill.
74%
of FA professionals believe financial education is critical to student success.
Source: iontuition 2016 Financial Literacy Trends Report
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22. Financial Education: Doing Well By Doing Good
84% of surveyed FA professionals agree: a direct correlation exists between default rates and financial education
Colleges with strong financial education programs have better CDRs
Source: iontuition 2016 Financial Literacy Trends Report
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23. Integration Group Education Online Education One-on-One Education
NSLDS
Canceled classes
moneysmarts.iu.edu
One-on-One Education
Staff talking points
Track topics
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24. Inceptia Resources Loan Summary Student Loan Knowledge HQ
NSLDS Tutorial
Federal Student Loan Info Sheet
Student Loan Borrowing 101
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25.
This session has a corresponding research brief which is available for free download. Please visit to view the brief.
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26. Questions?
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