College costs are rising at an alarming rate. According to College Board, tuition at four- year public colleges has risen more than 100% since 2001. In the recent years, ﬁnancial aid packages have not kept up with rising tuition costs.
With these rising costs, families need to start saving and planning for college as early as possible. One effective way to save for college is through 529 College Saving Plans. Under 529 College Saving Plans, earnings are not subject to federal taxes.
Sadly, only 26% of parents used savings from a 529 savings account to help pay for college, which suggests these accounts are highly underutilized. To help parents save for college, we partnered with Promise Indiana. Promise Indiana, an initiative of the Wabash County YMCA, partners with the Indiana Education Savings Authority to increase participation in the CollegeChoice 529 Direct Savings Plan (Indiana’s 529). Since its inception in 2013, The Promise has expanded into 18 Indiana counties.
Behavioral Diagnosis and Key Insights
Promise Indiana uses an “opt-in” registration model and seeks to increase children’s savings account (CSA) engagement. Through our research with them, we have deﬁned engagement as increasing program uptake (enrollment) and continued activity (deposits).
Our partnership began with an exploratory phase, which included an analysis of the existing program data and in-depth interviews with families, program coordinators, and partners from local government and ﬁnancial institutions. Through this process, we identiﬁed two key barriers related to account engagement:
- The beneﬁts of college are far in the future, so parents prioritize more concrete, present When parents are ﬁrst informed about their accounts, they are likely to assume that saving for college does not need to be a priority because the goal is both abstract and far off in the future.
- College is not a value or social norm for all families involved in the program. In Indiana, less than 25% of adults have a bachelor’s degree or If parents were able to obtain employment and have stable lives without having completed higher education, they may not instill the value of going to college in their children. Parents may also be unfamiliar with the college process, or they may be concerned that they lack the sufﬁcient means to help their children get there, regardless of when they start saving.
We ran an experiment the effects of postcard reminders, and their psychological framing, on CSA deposit activity. A total of 3,886 Indiana residents
from eight different counties were randomized into one of four treatment conditions:
- No Postcard
- Neutral Messaging: “Support your child by contributing to their CollegeChoice 529”
- Social Norms Framed: “Join families in your neighborhood who have already started saving for their child’s ”
- Time Framing: “That was fast! Your child completed another year at Remember, next year will go by quickly too!”
The postcards were mailed on July 2017. We were most interested in observing deposit activity for primary account holders. Speciﬁcally, we were interested in the effect the reminders had on deposit amounts (magnitude) and deposit rates
(frequency). Further, we were interested to see if the type of language, and their psychological framing, would influence deposit behaviors.There were two key limitations to this study. First, there was an issue in the mail-merging process that led to more people being put in the control, no-postcard condition. Second, there was a printing error that caused the neutral messaging text to be printed on the front of all cards and the varying text to only be on the back of the postcards. Unfortunately, since the printers also mailed the postcard, this error was not observed until after rollout.
No signiﬁcant differences in deposit activity were observed between the control (no postcard) and receiving any postcard. Overall, the postcards and their psychological frames had no discernible impact on college savings behavior.
While it cannot be wholly attributed to our intervention, a historical trend was observed such that Promise deposit activity was 2.2% greater in summer 2017 than it was in summer 2016.