Student Loan Repayment Options: Emails Make a Difference

Something as cheap and easy as an email can help students stay on track with their student loan payments.

The White House’s Social and Behavioral Sciences Team, the US Department of Education, and the Office of Federal Student Aid recently conducted a study involving 841,442 student borrowers who were 90 to 180 days delinquent on student loan payments.

The objective was to increase applications for income-driven repayment (IDR) options, which can help individuals pay off their debt by linking their monthly payments to their paychecks, the study authors noted.

The problem is that borrowers need more awareness about IDR options, as well as a push to apply for a plan.

The researchers experimented with the timing and content of emails to borrowers. Half of the sample received an email in November 2013, and the other half received an email in December 2013.

The messages fell into 4 categories: long and comprehensive, short and less detailed, an email reminding the borrower about losses, and one about gains.

What the researchers found was that the emails had a “significant, positive” effect on IDR applications.

Of those who received an email, 1.02% applied for an IDR in the next 20 days, while only 0.23% of those who were not sent an email did the same.

The longer, more comprehensive emails were slightly more effective than the shorter ones; the more detailed emails were associated with individuals completing an IDR application at a rate of 1.04%, compared with 0.86% of those sent the shorter email.

Emails emphasizing loss, rather than gains, were also more effective at increasing applications. However, the longer emails were associated with the highest rate of applications among the 4 types of emails.

“These findings suggest that low-cost, timely notices can make a significant difference on IDR enrollment rates among struggling student loan borrowers,” the researchers concluded. “While the effects are small in size in relative terms, this outcome is a measure of application rates within a 20-day window following a single email.”

Considering the large number of borrowers, the researchers said that applying these techniques could mean a single email would lead around 6600 people to sign up for an IDR plan.