Living burdened with debt negatively affects all aspects of someone’s ﬁnancial well-being. High debt payments can strain a household’s monthly balance sheet, turning even small or unexpected expenses into emergencies. High amounts of debt can also reduce credit scores, making it more expensive and difﬁcult to acquire assets or to ﬁnd credit in case of emergencies. Furthermore, access to and use of credit cards is at an all- time high in the United States. The New York Federal Reserve released a recent report showing that, collectively, U.S. households have racked up more than $12 trillion in debt, leaving a majority of Americans just one emergency away from ﬁnancial hardship.
GreenPath Financial Wellness offers a debt management plan (DMP), which can help individuals get out from under burdensome debt. DMP clients make payments directly to GreenPath, who in turn distributes these funds to the creditors.
GreenPath also negotiates with creditors directly. This often means that clients begin repaying their debt at lower interest rates, reduced fees, and at a lower monthly payment. However, the transition into a DMP is difﬁcult and many clients do not ﬁnish, thus forgoing the beneﬁts the DMP offers them.
Behavioral Diagnosis and Key Insights
We listened to counseling sessions and conducted interviews with counselors and other staff members to better understand the DMP experience. The team also followed up with qualitative interviews directly with DMP clients. This qualitative work was supplemented with an in-depth quantitative analysis of administrative data. Through this work, we identiﬁed several key barriers that ultimately shaped the design of the intervention.
- The value of the DMP is distant and abstract. DMP clients ﬁnd it difﬁcult to see progress toward a goal that feels neither quickly attainable nor
- The ﬁrst six months are especially difﬁcult for DMP clients. The transition to a DMP is especially difﬁcult for The ﬁrst six months show the highest rate of attrition before leveling off around the six-month mark.
- Early in the DMP, the focus is to achieve programmatic goals or to overcome programmatic The communication early in the DMP often reflects those goals rather than providing motivational messages.
We designed a series of encouraging messages that would be sent to clients when their DMP was activated, at the three-month mark, and at the six-month mark. These messages intended to increase the amount of communication with clients and to signal to clients that they are making progress on their DMP.
We randomly assigned new DMP clients to receive these messages, while others continued the DMP as they would normally.
In addition to the emails, we also randomly assigned half of those receiving the encouraging messages to receive a follow-up phone call. By varying the type and degree of outreach, we could test whether encouraging messages are more or less effective depending on the mode of communication.
We enrolled 3,683 new DMP clients for four months starting in December 2016 and ending in March 2017. In our analysis, we measured:
- The total number of days the client had an active DMP account in the ﬁrst six months.
- Whether the client had an active account at the end of the data collection period.
- Whether the client reached the three-month and the six-month marks in their DMP.
We did not see an effect of the messages on any of the primary outcome measures. The encouraging messaging had no effect on program duration or client retention, regardless of the mode of outreach.
Our intervention likely failed to have an effect either because encouraging messaging is the wrong type of messaging or the messages were not timely enough.
There are opportunities to explore other kinds of messaging or more frequent messaging. We did not test using text messages, which may be a more effective channel to reach clients.
However, our analysis does point to a variety of other factors that are likely more influential in terms of program outcomes. Speciﬁcally, our analysis suggests:
- Participants with higher savings are more likely to succeed in a
- Income on its own has little effect on DMP performance, but how income relates to expenses is important. Individuals with larger households and individuals with lower incomes relative to area median income (AMI) tend to have worse outcomes on a
- Clients with more unsecured debt actually tend to perform better in the DMP, likely because they see greater value from a DMP the higher their unsecured debt
- Unlike unsecured debt, clients with high amounts of student loan debt tend to perform worse in their
- Female DMP clients tend to have greater success on a DMP relative to their male counterparts, but this difference is mitigated by
Going forward, organizations interested in helping individuals repay debt would likely be better off tailoring interventions that leverage these factors, which our analysis suggests are likely to have a larger impact.