Using Behavioral Economics to Improve Debt Management Outcomes
This project will apply behavioral economics principles to improve financial outcomes for individuals and families enrolled in Debt Management Programs (DMPs) with national credit counseling agencies. IPA’s interventions in this space are designed to reduce DMP attrition and improve payment success. Research suggests that cognitive biases such as limited attention, hyperbolic discounting and the planning fallacy can lead DMP clients to neglect or abandon their financial goals, even after receiving debt counseling. IPA proposes interventions that can counter or harness these biases to improve DMP success and overall financial wellbeing. If effective, these interventions offer powerful, low-cost tools that credit counseling agencies and other stakeholders can apply to their core operations to help clients be more successful in reaching their goals.