In October of 2013, the U.S. government plans to institute a Behavioral Insights Team (BIT), bringing together academic behavioral science experts, behavioral design experts, and evaluation experts to design and test behavioral interventions to improve federal policies and programs. Two behavioral design experts, and current Vice Presidents at Ideas42, William Congdon and Will Tucker, have been appointed to the BIT to lead one of its start-up projects—using behavioral insights to ensure and improve student loan repayment. Specifically, the project will target improving communications from the Department of Education to borrowers who are at the early stages of delinquency by making changes to notices and letters designed to help get borrowers back on track and prevent late-stage delinquency. It will also aim to reduce the drop-out rate of borrowers in rehabilitation repayment programs, which borrowers can join after defaulting on their loan, by ensuring that they meet their agreed-upon payment requirements.
Based on preliminary analyses, Congdon and Tucker hypothesize that procrastination (deferring or delaying opening, reading, and action), avoidance of unpleasant news or actions, and confusion about next steps may be preventing those with student loans from opening, understanding, and acting on Department of Education communications regarding outstanding payments. This project will test two design elements that are especially promising according to Congdon and Tucker's initial diagnosis: the simplification of the letter and the introduction of social norms messages.
In a first stage, Congdon and Tucker will focus on simplifying the message by removing unnecessary text or images and on making salient to the borrowers the costs and consequences of failure to remain or become current on the loan. In a second stage, social norms messages will be added to the letter, informing recipients about how other student loan borrowers behave. For both stages of the letter redesign, they will test multiple treatment groups both against each other and a control group, using a total sample size of approximately 10,000 borrowers. Where possible, Congdon and Tucker will use randomized, controlled trials. The outcomes of interest for this project will be repayment rates on student loans, improvements in delinquency status of the loan, and additional dollars repaid on the loan.
The key results will be disseminated in practical, replicable formats, as well as in the BIT’s public reports. Congdon and Tucker will also work to get government clearance to use the data to publish formal academic papers.