Traditional forms of financial education, such as student loan entrance and exit counseling, have proven immemorable and unimpactful. Alternative and innovative solutions are needed, including rules of thumb. Rules of thumb are simple, memorable, actionable, broadly applicable, and inexpensive to produce and disseminate. They provide consumers with a concise direction regarding a behavior to take that is associated with a positive outcome.
Through a previous partnership with the Consumer Financial Protection Bureau (CFPB) and the Urban Institute, Commonwealth implemented a test of rules of thumb with members of a credit union with revolving credit card debt. The research revealed a positive impact on the balances of the credit borrowers who had received rules of thumb. Given these promising results about the impact of rules of thumb for credit card revolvers and their low cost, Commonwealth was interested in exploring the impact of rules of thumb on borrowers of non-revolving debt. Commonwealth decided to study rules of thumb for student loan borrowers given the enormity of the challenge.
With its partner, American Student Assistance (ASA), Commonwealth undertook a process that included selecting a behavior of focus and targeting borrowers; drafting and finalizing rule wording and graphics with consumer input; determining a delivery channel; and piloting four rules of thumb over the course of nine months with nearly 10,000 borrowers who were either in repayment or were delinquent.