Innovative Arrears and Economic Stability Initiatives

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1 Innovative Arrears and Economic Stability Initiatives

2 Innovative Arrears Initiatives: Agenda BAFF Demonstration Grants Building Assets for Fathers and Families BAFF Demonstration Grants Washington State Building Assets for Children- Texas Child Support for College (CS4C) Building Assets for Children- Kansas Child Support Savings Initiative (CSSI)

3 BAFF Demonstration Grants Building Assets for Fathers and Families David Johnson Region 10 OCSE Program Specialist, Seattle

4 OCSE s BAFF Demonstration Grants Building Assets for Fathers and Families Engagement of Fathers from Birth Economic Stability Child Support Prevention CSE Core Mission: Locate Parents Establish Paternity Establish Orders Collect Support Healthy Family Relationships Family Violence Collaboration Health Care Coverage

5 What OCSE Hoped to Learn & Do Through the BAFF Demonstration Grants How best to provide asset-building services to noncustodial parents so they are better able to meet their child support obligations. How the AFI ( Assets for Independence ), fatherhood, and child support programs can partner to best serve parents in the child support system. Encourage partnerships across the country between asset building and financial education organizations, child support, and fatherhood programs. Gain experience bringing asset building servings to child support involved parents through special funding from OCSE.

6 BAFF Grants: Contrast and Compare Approach of Seven Demonstration Sites Each of these states received about $225,000 to test these types of partnerships and serve parents for 3 years: Colorado Florida Michigan Ohio Tennessee Texas Washington State

7 BAFF Grants: What does success look like? Establishing an Individual Development Account (IDA)? Better control of finances and budgets? Stronger engagement with the child support agency? More consistent child support payments?

8 Javier s Success Story from Michigan Javier has six children with a large child support debt. BAFF connected him to an employment partner where he obtained steady employment at a local manufacturing company. He opened his very first bank account and also opened a matching IDA where he deposits $15/week Because he was actively engaged in the BAFF program and engaged with the child support agency, part of his tax refund intercept was returned to him to help build his IDA while the other part helped cover some state owed debt. Increased parenting time was requested through the courts and granted CP agreed to help by forgiving some arrears. Completed required financial education classes, as well as an introduction to homeownership class.

9 What Creates a BAFF Success Story? David s Casual Observation. 1. An AFI (Assets for Independence) Partner who can provide a safe and trusted entry portal and ally to provide financial education, coaching, IDA options for savings, navigation help with debt issues including child support. 2. A committed obligor parent willing to commit time to classes and coaching and a parent with follow-through. 3. A child support agency willing to show a little flexibility, creativity and specialized attention to obligors involved in positive, behavior-changing activities with the community partner and child support.

10 BAFF Demonstration Grants Washington State Asaph Glosser MEF Associates

11 BAFF Washington State: Overview Three-year grant from OCSE to support increased asset building services for NCPs Washington DCS one of seven states to receive funding in 2010 Collaboration between DCS and AFI grantees in two sites (Spokane and Vancouver) Goals Evaluation - Serve 600 NCPs in 3 years -Promote increased financial stability, asset ownership, and ability to meet child support obligations -Characteristics of participants -Describe implementation -Participant outcomes

12 BAFF Washington State: Initiative Design Target low-income NCPs Provide case management and asset building services -Financial education -Other asset building services -Referrals to supportive services -More intensive child support services

13 BAFF Washington State Initiative Participant Characteristics Child Support Characteristics -85% had current support due, median order amount of roughly $230. -Median arrears: Over $7,000 in both sites -Limited payments in months leading up to enrollment

14 BAFF Washington State: Services Case management and navigation -Employment -Legal (parenting plans) -Referrals to supportive services (e.g., housing, food, chemical dependency, Veteran s services) Asset building -IDAs -Financial education -Banking, budgeting, and credit Child support -Case information -Negotiation on payments -Licenses -Modifications and debt write-off

15 BAFF Washington State: Child Support Outcomes 81% of BAFF NCPs with current support due at enrollment made a payment -Median payment: $1,212 66% of BAFF NCPs with past support due at enrollment made a payment toward this debt -On average, 91 days to payment -Median payment: $952 37% received modifications Change in median arrears from point of enrollment -$605 increase in Spokane -$263 decrease in Vancouver 50 Cases closed

16 BAFF Washington State: Conclusions Means to engage disconnected NCPs -Help with child support is the carrot NCP distrust of DCS and misconceptions about child support Service needs of non-compliant NCPs -Child support -Supportive services employment and housing -Specific needs for ex-offenders Who you target matters -Willing, but not able NCPs -Identifying right service mix (considering payment history and income) Leveraging community partners -Disseminating child support knowledge

17 Child Savings Accounts Research from the Assets and Education Initiative (AEDI) University of Kansas School of Social Welfare

18 Child Savings Accounts Why savings: short-term access These percentages enroll in college: -45% of low or moderate-income students with no account -49% of students with only basic savings not designated for college -71% with school savings <$1, 65% with school savings from $1 to $499-72% of students with school savings of $500+ Opening an account turns college into an important, not an impossible, goal, with a clear strategy for how to overcome cost barriers. University of Kansas School of Social Welfare Policy Director, Assets and Education Initiative (AEDI)

19 Child Savings Accounts Why savings: medium-term outcomes These percentages graduate from college: - 5%of students with no account -8% with only basic savings -13% who have school savings but less than $1 saved -25% who have school savings from $1 to $499-33% of students who have school savings of $500+ Seventy-four percent of students with college savings are on course, compared to 41% of students with no savings, a gap of 33%.

20 Child Savings Accounts Can they save enough to make a difference? Assets change the way children think about college, and about their futures. These attitude, expectation, and behavior effects may be just as important as the money in charting educational trajectories. The right matches and incentives can catalyze sizable balances, but even $1 can develop an identity as college-bound or a college saver.

21 Child Savings Accounts Not a fortune, but a world of difference There appears to be a point at which household income is high enough that children s savings makes no real difference in educational outcomes, but, for low- and moderate-income children, having even small amounts of savings improves the odds of graduation. Enrollment Graduation No college savings 45% 5% $1 to $499 saved 65% 25% $500 or more saved 72% 33%

22 Child Support For College An Evaluation of the Texas CS4C Asset-Building Initiative Cynthia Osborne Associate Professor Director, Child and Family Research Partnership LBJ School of Public Affairs University of Texas at Austin

23 Texas CS4C: Overview Background The Child Support for College (CS4C) Program Evaluation Findings Lessons Learned

24 Texas: CS4C Background Low-income parents cite saving for college as their #1 savings goal But only 37% are saving for college, and tuition costs are rising To meet high costs, two-thirds of students take out loans More than 1 in 7 students can t meet loan repayments and enter into default

25 Texas CS4C: Can Asset Building Help? Texas is 1 of 15 states offering financial incentives to save in a 529 college savings plan Most states offer matching grant program. Typical features include: -Match rate 2:1 or 1:1 most common -Annual match limit (e.g. $500) -Lifetime max (e.g. $2500) or max years (e.g. 5yrs) CS4C builds on these models

26 Texas CS4C: Why Asset Building and Child Support? Texas Child Support System transfers nearly $3.4 billion annually Supports more than 1.6 million or almost 1 in 4 Texas children Texas custodial parents rate saving for children s education as most important financial goal Leverages existing infrastructure to target traditionally lower-income population in need of college savings supports Aligns with goals of Child Support Division to strengthen families long-term financial stability

27 Texas CS4C: Program Details Designed to promote college saving, educational advancement, and selfsufficiency among the Texas child support population through the provision of financial coaching and college savings incentives Collaboration between public, private, nonprofit, and academic institutions -Citi Community Development funding agent -RAISE Texas fiscal agent -Office of the Attorney General program administration -3 Community Organizations program provider -CFRP, LBJ School evaluator

28 Texas CS4C: Target Population Custodial parents receiving lump sum arrears -Research shows lump sums may provide reset moment to think beyond day-to-day and invest in long-term goals -Marginal Propensity to Save (MPS) is higher with lump sums than regular income

29 Texas CS4C: Early Program Design Was Complex OAG sends letters or s to child support customers who receive lump sums Potential participant calls local community organization to inquire about program Participant comes to community organization to learn about savings options and completes intake survey Participant chooses to enroll (or not) in 529 plan Participant eligible for a 20% match on initial deposit (up to $400) only after: -Completing 3 financial coaching sessions -Leaving money in account for 6 months Participant then eligible for 10% match on subsequent deposits (up to $500 total) after completing 1 more financial coaching session

30 Texas CS4C: Simplifying the Program Design Over 18-month period, several modifications were made: -Removed holding period on initial deposits -Allowed for all deposits to be matched at 20% -Seeded account with $100 -Matched all deposits 100%, up to $500 -Removed financial coaching requirements -Targeted all low-income child support customers As barriers were removed, more accounts were opened

31 Texas CS4C Changing Program Design Increased Accounts Total Accounts Outreach: Lump Sum Recipients Financial Coaching: 3 Required Incentives: 20% Initial Match 10% Later Match (to $500) CS4C Accounts Opened by Month Outreach: Lump Sum Recipients Financial Coaching: 4 Required Incentives: 20% Match On All Deposits (to $500) Outreach: Lump Sum Recipients Financial Coaching: 4 Required Incentives: $100 Seed Plus 20% Match (to $400) Outreach: Lump Sum Recipients Financial Coaching: Optional Incentives: $100 Seed Plus 100% Match (to $400) 37 Outreach: Consistent Child Support Financial Coaching: Optional Incentives: $100 Seed Plus 100% Match (to $400) Mar2012 Apr2012 Source: Account statements May2012 Jun2012 Jul2012 Aug2012 Sep2012 Oct Nov2012 Dec2012 Month and Year 3 10 Jan2013 Feb2013 Mar Apr2013 May2013 Jun Jul2013 Aug

32 Texas CS4C Changing Program Design Quickened Account Opening Length Between Inquiry and Account Opening in Days feb mar2012 Source: Inquiry forms and account statements Time Between Inquiry and Account Opening Weighted by Number of Accounts 01apr may jun jul aug sep oct nov dec jan2013 Inquiry Dates 01feb mar apr may jun jul aug sep2013

33 Texas CS4C: Program Outputs 34,408 Contacted 298 Inquirers 99 Participants 63 Account Openers 116 accounts 214 financial coaching sessions $50,888 participant deposits $38,785 incentive payments

34 Texas CS4C What Did the Median Participant Save? $1,000 $900 $925 $800 $700 $600 $500 $425 $500 $400 $300 $200 $100 $25 $0 Initial Participant Deposit Total Participant Deposits CS4C Incentive Payments Final Account Balance

35 Texas CS4C: Who Inquired/Participated? Gender -9 in 10 Female Race/Ethnicity -Almost two-thirds Hispanic Education -Account-openers twice as likely as Inquirers or Non-openers to have 4-year college degree (40%) -Account-openers twice as likely as Inquirers or Non-openers to have completed own educational goals (43%) Income -Account-openers more likely to have higher incomes

36 Texas CS4C Account Openers Have Higher Incomes 45% 40% 35% 30% 25% 20% 42% Total Yearly Household Income 35% 19% 18% 15% 10% 5% 5% 9% 0% Inquirers (N=116) Non-Openers (N=34) Account Openers (N=62) Note: Not all income bins shown. Source: Inquiry form, Intake survey, and exit survey results Under $20,000 Over $75,000

37 Texas CS4C Why Participants Opened Accounts Saving for My Child's Education 92% Helping My Child Pursue College 92% Matched Contributions 89% Accounts Are Good Investment Choices 69% Financial Coaching Sessions 58% CS4C Gave Me a Push to Save 56% Lump Sum Child Support Payment 25% Note: Not all motivations shown Source: Exit Survey responses from account openers (N=36) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % Strongly Agree

38 Texas CS4C Why Inquirers Didn t Open Accounts Not Enough Money to Open Account 41% Not Receiving Child Support Consistently 29% No Time for Financial Coaching 17% Did Not Understand CS4C 15% Worried About Accessing Money 10% Not the Right Investment 10% Note: Respondents could choose multiple answers Source: Exit survey responses from inquirers and non-openers (N=69) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% % Selecting Answer Choice

39 Texas CS4C: Participants Began Saving for College Changes in Behaviors and Attitudes around Child's Higher Education Began Saving for College 39% 83% Confident Children Will Go to College Confident Children Will Graduate from College 78% 81% 86% 89% Talk to My Children About College 86% 94% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Intake and exit survey responses from account openers (N=36) Intake Survey Exit Survey

40 Texas CS4C: In Their Own Words It sets a foundation for your kids coming up, so they won t be in the same situation. Austin focus group participant [CS4C] gives my son the opportunity to get his foot in the door. Austin focus group participant It s about helping [parents] understand the importance of putting money away for their children s education. My son sat in with me while I was with [Financial Coach]. He knows exactly what I put aside for him and we look at the account together. San Antonio focus group participant I ve been able to save up a lot. You think you can t do it but I ve done it. Sometimes we do without a lot of things but they re things we can go without. Austin focus group participant

41 Texas CS4C: Conclusions &Lessons Learned Program Design -Difficult to generate inquiries, but take-up was high -Changing incentives/barriers increased accounts -Lump sum was not a salient motivator -Inconsistent child support and insufficient money hindered participation Benefits of Participation -Participants began saving for college -Many reported psychological benefits to saving for college Key Programmatic Lessons -Establish clear goals -Understand programmatic constraints -Align with principles of asset-building -Ensure consistency with goals of participating institutions -Keep it simple

42 Kansas Child Support Savings Initiative Melissa Johnson Kansas Child Support Services Deputy Director

43 Kansas Child Support Savings Initiative In June, 2013 Kansas Department for Children and Families began a partnership with the State Treasurer s Office to allow Noncustodial Parents to establish 529 higher education savings accounts for their children and receive reductions in arrears owed at the same time.

44 Kansas Child Support Savings Initiative Core Criteria: Child is still a minor. Current support plus $1 towards arrears are paid in the same month as deposit into the 529. If arrears only then $1 is paid towards the arrears in the same month as deposit into the deposits must be made separately from child support and mailed direct to Learning Quest.

45 Kansas Child Support Savings Initiative State owed arrears: For every $1 deposited into the 529 account in qualifying month, $2 of state owed arrears will be forgiven Custodial parent owed arrears: For every $1 deposited into the 529 account in qualifying month, $1 match will be sent to the KPC and distributed as arrears payment to custodial parent.

46 Kansas Child Support Savings Initiative As of September 15, 2014: 58 savings accounts opened $23, invested in 529 accounts $45, State arrears forgiven Forms and commercial found at Information can be obtained by calling

47 Questions? Need More Information? David Johnson Phone: Asaph Glosser Feel free to contact us. Phone: Melissa Johnson Phone: Tonya Brunson Cynthia Osborne Phone: