The Impact of Incentives on Student Financial Literacy Programs

The 2017 Sodexo International University Lifestyle survey¹ shows that students in the US worry more about paying for their degree.

In fact, 45% worry about the amount of debt they will have at graduation and 50% worry about day-to-day finances.

Of those, 19% are extremely concerned. Because of these concerns, nearly one-third consider dropping out of college.

A 2018 survey by Student Loan Hero² learned that students do not understand their loan. They found that:

• 52% believe that interest does not accrue on loans while they attend classes
• 53% believe that student loan payments will be based on their income at the time of repayment
• 70% have misconceptions about student loan forgiveness programs

This is frightening news considering the average student will graduate with $39,400 in loans.³

This kind of debt could easily affect the financial well-being of these students well into adulthood.

Implications of Student Financial Stress

A 2017 study in the Journal of Financial Aid called "Student Loans, Financial Stress, and College Student Retention"⁴ focused on how student financial stress affected college retention.

It appears that 60% of college dropouts are paying their own way through school. Because they are unable to balance work, school, and leisure activities, they choose to stop taking classes.

The results of the study showed that those who felt financial stress and had high student loan debt were more likely to stop going to college.

The best way to combat this issue is through early intervention. The Sodexo study shows that students seem to understand this concept since 60% want to learn more about money management.

That's why student financial wellness should be a big focus on college campuses.

Money management training, however, needs to go far beyond student loan debt. Students state that they need help figuring out a monthly budget, credit scores, cosigning, savings, and further education planning.

Of course, it will be important to get students to take advantage of any financial wellness program adopted by a school of higher education.

Based on the analysis of iGrad and Enrich user activity in May 2018, there is a positive correlation between the number of badges earned, articles read, and videos watched with higher post-test scores. Higher post-test scores correlate to stronger financial health.

So, the question becomes, how can universities encourage their students to use their financial wellness program?

First, universities need to adequately publicize the program to students. Then, they need to offer incentives.

Create a Plan for Publicity

The key to a successful financial wellness program rests with internal communication with the students.

That's why it is imperative to develop a plan that lets students know that the program exists, how they can participate, and why it matters.

Schools need to begin by talking with their students about their financial needs and what they'd like to see in a student financial wellness program.

This kind of grassroots participation encourages students to "buy in" the process. Those that are most excited about the program can become spokespeople to help get others excited.

If you don't know where to start, try creating a 12-month calendar of topics and communications strategy (this post shows you how).

Most importantly, students need to understand the objectives of the financial wellness program. This includes knowing how and when success will be measured.

This part of the plan requires regular communication. Such communication should include:

• Community events encouraging financial wellness
• Discounted opportunities for financial products
• Highlights of program success

Use current internal communication and social media to promote the program. School communication managers should be careful not to overwhelm their students with too much communication.

This will result in many unread announcements.

Instead, piggyback financial wellness program promotion onto existing communications such as weekly newsletters or updates.  As you do this, make sure that your messaging is consistent across all channels (read this post for more messaging strategies).

Next, form a financial wellness task force which includes members from multiple administrative departments. iGrad's 2014 Financial Literacy Survey showed that of the schools with a task force, more than half (54%) reported that their financial literacy program is used by more than 30% of students.

In contrast, schools without such a task force were less than half as likely (22%) to achieve a usage rate of at least 30% (Read the full Survey Analysis here).

Finally, be sure to celebrate when goals have been met. Achieving goals encourages others to participate, too.

Schools with successful financial wellness programs understand that more communication equals more participation.

However, they also recognize another component of participation. Incentives.

Incentives Increase Participation

As shown by an Enrich case study, one way to get greater adoption of a financial wellness program is to provide incentives.

A company with 52,000 employees agreed to contribute $250 to each employee's HSA account if they met the requirement to complete five of the nine financial wellness courses.

Although the statistics prior to the session were good, usage statistics after the session were significantly better:

**This is a company case study, however, the results are similar across all financial wellness programs.

Although the purpose of the financial wellness program is to get students to adopt and maintain healthy financial behaviors for the rest of their lives, first they must internalize these behaviors.

Rewards for participation help transition students from external incentives to an internal understanding.

Students rarely adopt and maintain healthy financial behaviors all at once. Instead, changes happen in stages.

First students contemplate the correct behaviors. Then they prepare to adopt them. Eventually, action occurs until finally, maintenance is achieved.

Students starting a new financial behavior typically lack intrinsic motivation to maintain the behavior because they do not yet know the rewards the behavior will bring.

Adding an incentive to get students to act is a great way to nudge people to act and move toward maintaining new behaviors. Then as the students begin to enjoy the benefits of the new behavior, they will adopt these behaviors for life.

Most school financial wellness program incentives are benefits-based or outcomes-based. Benefits-based incentives have a great impact on student participation. These incentives are available to all students who do what is required to earn the reward.

Keep in mind that the dollar amount of the incentive needs to be high enough to motivate students to participate in the financial wellness plan.

However, the requirements to get the incentive need to be substantial as well. This makes the work needed to achieve the incentive meaningful.

Some possible benefits-based incentives include:

• $50 to $100 for enrollment in the financial wellness program
• $50 to $100 for completing a specific number of requirements
• $100 for completing a personal financial health action plan
• $100 for completing a financial wellness class

In addition, benefits-based incentives should include some short-term rewards that all who participate may win. These include drawings and raffles.

Outcomes-based incentives reward students for healthy financial behaviors. Most outcomes-based incentives last several years. Each year that a student completes the necessary tasks, they are rewarded. Often, points are rewarded for completing certain tasks. At the end of a given time period, points are redeemed for prizes.

With such an emphasis on student financial wellness, schools need to ensure that their students participate in their financial wellness programs. Without participation, such programs are both a waste of time and money.

Communication about the program and incentives to complete specific activates will help ensure a successful program that helps students increase their financial health and increases the bottom line for the school.

Last but not lease, consult an expert. iGrad specializes in building successful financial wellness programs, so make sure to subscribe to our monthly newsletter or contact us to help your school with its own financial wellness program.

1 - https://www.sodexo.com/home/media/publications/studies-and-reports/international-university-lifesty.html
2 - https://studentloanhero.com/featured/survey-majority-student-loan-borrowers-know-interest-forgiveness-works/
3 - https://www.aicpa.org/press/pressreleases/2018/fewer-americans-are-delaying-major-life-events-because-of-money.html
4 - https://publications.nasfaa.org/cgi/viewcontent.cgi?article=1605&context=jsfa