According to the US Census Bureau, college graduates earn almost twice as much as those with only a high school diploma over the course of their lifetime and are significantly more likely to be employed. This means they are better able to support themselves and their families. A larger pool of college graduates also helps to strengthen the U.S. economy by increasing tax returns and consumer spending power and building a more educated workforce that can compete on a global stage.
But the reality is that not everyone finds it easy to make the most out of opportunities in higher education. According to the U.S. Department of Education, less than half of low-income high school seniors who intend to go to college end up enrolling, and just one in 12 graduate with a degree by age 24. Less than 60% of full-time students graduate from four-year colleges within six years, and less than 30% graduate from community colleges within three years.
This section of our larger portfolio of postsecondary work, detailed in the report Nudging for Success, focuses on applying behavioral science in the post-graduation phase.
Post-Graduation Day: Get on Track to Pay it Back
Without a doubt, financial aid plays a critical role in helping students access higher education. Yet even if they’re able to secure it and persist through all of the other hidden challenges on the road to graduation day, they’re not off the hook yet. Once students graduate or leave college, they need to begin repaying their loans, and a new set of behavioral barriers emerges. Even with the best of intentions, borrowers can find themselves missing loan payments or even slipping into default. The problem is widespread: in the second half of 2015, almost 3 million student loan borrowers nationwide were at least a month behind on their payments.
While there are programs in place to prevent and address these problems, very few borrowers take advantage of them. For student loan borrowers struggling with repayment, debt relief assistance can reduce monthly payments. But feelings of intimidation, a very human tendency to avoid dealing with tough problems as long as possible, and a difficult application process all prevent a significant number of borrowers from tapping into existing financial help early enough–or at all–to avoid financial trouble. Some of these challenges stem from choices at the beginning of the repayment process. Upon leaving college, borrowers are all defaulted into the same ‘standard’ repayment plan, and some may not switch to better-suited plans until after they experience trouble making their first few loan payments.
Working with institutions that serve college loan borrowers, ideas42 devised behaviorally-informed strategies to help students better consider information about the type of repayment plan they need and boost their efforts to make use of federal programs available for delinquent borrowers.
We used a combination of personalized outreach, email reminders, and hassle-reducing step-by-step instructions in an effort to help borrowers enroll in federal distressed debt relief programs. These strategies have significant implications for the financial health and wellbeing of millions of students.