According to Sallie Mae, 43% of parents have not started saving for their children’s college.
Of those that are savings, the average savings account totals just $16,380. Sadly, the average tuition per year is $25,260 public four-year institution and $34,740 for a private four-year institution. Fidelity reports that although 70% of parents intend to cover the cost of tuition in full, they're only on track to fulﬁll 29% of that goal by the time their children reach freshman year.
We partnered with the City of St. Louis Treasurer’s Ofﬁce (St. Louis) to help families save for college. St. Louis developed a pioneering program to promote college savings and ﬁnancial literacy for the city’s schoolchildren and families through the “College Kids” children’s savings account (CSA) program.
Behavioral Diagnosis and Key Insights
College Kids’ purpose is to provide all children enrolled in St. Louis Public Schools and St. Louis City charter schools with an automatically-opened savings account for postsecondary education, thereby increasing the accessibility of postsecondary education for its residents. Since its launch in 2015, the program now serves over 10,000 students.
We worked with St. Louis to improve rates of parents both depositing into their account and returning their consent form for receiving attendance incentives. As the partnership has evolved, we have focused in particular on encouraging parents to set up recurring direct deposits.
Experiment 1: Testing Messenger Effects and Time Progressions to Help Families Save for College with The St. Louis Office of Financial Empowerment
From our behavioral diagnosis, we chose to focus on helping families to 1) return their program consent forms to receive attendance incentives and 2) make deposits into their accounts. We tested the following behavioral principles and related questions with a sample of 6,265 families:
- Messenger effects: Are parents more likely to make deposits when the program information is delivered to them by their children rather than through the mail?
- Time progression: Are parents more likely to make deposits when they feel like college is approaching more quickly?
To test these questions, we created packets to send to families at the end of the school year. These packets included an end-of-year statement with their account balance, a call-to-action for their next step in the program, a consent form to return, and instructions for how to make deposits.
We created an experiment varying both how the parents received the packet, through the mail or from their child’s school backpack, and the presence or absence of a front page of the packet depicting a timeline between the present and college. The parents were randomly divided into one of the following four groups:
- Received packets in the mail, no front page
- Received packet in the mail, with front page
- Received packet from child, no front page
- Receive packet from child, with front page
“Families who received their packet via their child’s backpack, and who had a front page depicting the distance between the present and college, were more likely to make a deposit."
We pre-tested these front-page visualizations and carried the highest-performing version into the ﬁeld test. We also deliberately had a small group of parents that did not receive a packet so that we could compare overall effects of our intervention with the previous approach of not having an end-of-year touch point.
We sent out 5,576 packets in April – with a control group of 689 people who received no packet – and collected data for the following two months.
During the intervention period, 154 families returned the consent forms that enabled them to receive attendance incentives, while 65 families made deposits into their accounts. Families who received a packet were more likely to return their forms and make deposits than those who did not receive a packet, with a 2.3% percentage point increase for consent forms and a 0.9% percentage point increase for deposits.
In our experimental conditions, we discovered that when packets were sent out through schools, rather than the mail, families were more likely to return their forms and make deposits. We also found that families were more likely to return their forms when they did not receive the time progression front page, but were more likely to make deposits when they did receive the page.
Front Page Visualization
We suspect that, when families did not receive a front page, the ﬁrst item they saw was the call-to-action to return their consent form. While the effects of this ﬁrst experiment were small, we used these insights in order to continue developing interventions for the beginning of the following school year. In follow-up tests, we intend to focus on increasing sign-ups for direct deposit so that we can encourage longer-term engagement while also creating interventions that are higher-touch to increase overall participation rates.
Experimental 2: Using Messenger Effects and Time Progression to Increase College Savings Direct Deposits
Building on the end-of-year packet experiment and lab studies, we decided to further investigate messenger effects and time progression with an SMS-based experiment. SMS messages function as a more direct reminder to take action compared to paper packets that can be easily overlooked.
To expand our previous work on messenger effects, we framed text messages as if they were from different figures of authority: either the school principal (this varied by school) or the city treasurer (a well-known public figure). This issue of who should offer information about the program – the school or the city – is one that is ubiquitous across college savings programs, so testing this promises to offer scalable insights.
With these ideas in place, we designed a four-condition study– varying the messenger and the time progression. We also had a control condition which received no SMS message.
These messages were sent in combination with a start-of-year packet, a modified version of the one sent in April, to inform parents about the program. Note that everyone in the SMS conditions received two messages – one that arrived the same day as the packet and one that arrived a week later.
Experiment 3: Using Pre-commitment to Encourage College Savings with St. Louis Office for Financial Empowerment
We are also conducting a third experiment, also during this start-of-year period, to investigate the effect of pre-commitment on college savings. From the insight that parents often struggle to save despite their desire, we added a section to the consent form enabling parents to pre-commit to saving for college in the future.
We are testing two conditions: (1) the full start-of-year packet and (2) the full start-of- year packet plus a checkbox in the consent form to indicate an interest in saving in the future. We expect this to be effective for two reasons: (1) because it enables us to send a follow-up in January reminding them of their pre-commitment, and (2) because this commitment may allow parents to signal to themselves that they want to start saving in the present.