Introducing the New and Improved Credit Report

The benefits might not be what you expect

Credit reports have been notorious for inaccuracies caused by insufficient data collection standards. In the most extreme cases, individuals have been mistaken for terrorists or marked as deceased because of an incorrect connection with someone of a similar name (a problem so pronounced it was featured on John Oliver’s Last Week Tonight). Thankfully, the three nationwide consumer reporting agencies – Equifax, Experian and TransUnion – are collaborating on an initiative to enhance the accuracy of credit reports called the National Consumer Assistance Plan (NCAP).

On July 1, new credit reporting standards went into effect instituting a new minimum for identifying information on public records for credit reporting (it now needs to have a name, address, AND social security number and/or date of birth), plus a minimum frequency of courthouse visits to obtain newly filed and updated public records of at least every 90 days. About 12 million people are expected to see an improvement in their credit scores through the removal of most civil judgments and tax liens, with an average score increase of 10 points thanks to the new regulations.

The cumulative effect on the lives of low- to moderate-income Americans will go a long way towards achieving lasting financial security:

  1.  New Opportunities

Credit scores determine an individual’s eligibility for life-changing opportunities including housing, student loans, and in many states, employment. Stress around credit is far too common with our financial coaching customers: according to data collected through our web-based financial coaching platform, Change Machine, 22% of customers in 2016 came to a financial coach because of an issue with credit, including the 24% who were “credit invisible.” When having a place for a family to live is at stake, no one should face a rejection because of inaccurate or out-of-date information on their credit report.

  1.  Relief from the Dispute Process

The Clinic’s coaches experience the struggle of helping customers navigate the credit reporting dispute process firsthand when they find incorrect information. It is a lengthy, time consuming process to collect the necessary documents and fill out the correct paperwork. For someone working several jobs just to put food on the table, this onerous process can be a challenge to say the least. Then, as an FTC study found, most consumers (nearly 70 percent in their study) who complete the dispute process continue to see inaccurate information on their report. With the improved standards of data reported, there will be less inaccuracies to dispute, easing the burden of removing incorrect or questionable information.

  1. Looking Forward

The next phase of the NCAP takes effect on September 15, setting a 180-day waiting period for medical debt before including it on a credit report. It will also remove medical debt from consumers’ reports once it’s paid by an insurer. We all know how complicated health insurance is – the forthcoming changes to reporting medical debt will ensure disputes with insurers and delays in payment can be resolved without an individual’s credit score taking an unnecessary hit.

The Financial Clinic applauds these changes that place higher standards on the reporting of negative credit items of public records and medical debt. We believe that this will lead to fewer financial security hurdles for our customers and an easier dispute process for coaching around the country.

What challenges do your customers face because of their credit reports? Do the new standards alleviate these challenges or is there still room for improvement? Join the conversation on Change Machine’s SHARE community!

Want to learn more? Join the Clinic on August 22 for a virtual presentation on Pulling and Reviewing Credit Reports.

 

Why Repealing the Affordable Care Act Means Families Lose Homes

Adam Ciminello | Executive Coordinator | The Financial Clinic

Today, the Senate Majority Leader Mitch McConnell announced he was formally postponing the previously anticipated vote on a full repeal and replace of the Affordable Care Act (ACA), the signature legislation of the Obama Administration from which more than 22 million Americans gained health insurance coverage. While the ACA contained notable imperfections and its long-term goal of making Americans more healthy is still undetermined, it nonetheless represents the most transformative and ambitious attempt towards guaranteeing health insurance as a basic human right afforded to all American citizens. Now, as has been loudly and frequently promised for more than 7 years, the GOP seems poised to complete their stated mission of repealing and replacing the Affordable Care Act – perhaps now as soon as early July – gambling with the security and health of millions of low-to moderate-income Americans with little regard for their wellbeing. The new bill, the Better Care and Reconciliation Act, has undergone multiple iterations and a formal assessment from the nonpartisan Congressional Budget Office, but the conclusion remains the same: more than 20 million people would lose healthcare coverage by 2026. There is little faith to be had or reason to believe that this reality will suddenly change whenever it is put before a Senate vote.

Not only would a repeal of this scale be a mistake in terms of personal health, it also has the potential to weaken financial security for these groups of Americans, a topic our friends and colleagues at the Center for Social Development at the University of Washington St. Louis explored extensively in a recent study released last week. In the study, findings documented that low-income Americans who gained health insurance – the vast majority of which came from the insurance marketplace – were much more likely to make their rent and mortgage payments, with the rate of home delinquency for households without access to employer insurance falling in some cases by 31%. This is consistent with previous studies tracking similar outcomes: fewer Americans have struggled to pay medical bills and bills in collections when personal health care costs have declined, providing Americans with the security to know that they can brace for a crisis in their personal health and reserve their entire focus for a full recovery.

“Housing stability contributes in turn to community stability”

These studies represent a reality at The Financial Clinic that we are committed to confronting; all forms of social well-being are interconnected. When Professor Michael Sherraden, Founder and Director of the Center for Social Development, writes, “Housing stability contributes in turn to community stability,” it underscores a basic principle that we unequivocally support: you cannot address a single barrier to opportunity effectively without addressing (or, at least, attempting to address) ALL barriers to opportunity. We know this to be true because we also know the opposite to be true: health insecurity contributes in turn to financial insecurity, contributing in turn to community insecurity. We see this firsthand in our work at the Clinic and the communities we are committed to supporting, like Mary (pseudonym), a Clinic customer who lost her job because of a high-risk pregnancy that made her physically unable to work. Her husband had left her with nothing, and as her medical debts continued to increase, she could no longer pay any of her bills and her credit score dropped to 454, falling into one of the lowest credit score levels. Shortly after giving birth to her daughter, she was evicted. Mary and her newborn were left with no home and over $7,000 in debt. Mary, like all too many uninsured Americans, deserves more from her elected officials and her story illustrates the need to expand coverage and assistance for those unable to afford insurance, not the other way around.

While today Americans can breathe a sigh of relief that the bill has been postponed, similar to the corresponding House bill, it will inevitably be put before a vote. When that disappointing day arrives, this bill will not only have a catastrophic effect on the ability for low-to moderate-income Americans to obtain healthcare, it will also have a larger ripple effect on the economy and the financial security of ordinary Americans. With more than 22 million Americans expected to be uninsured and enormous cuts to Medicaid, the impact that this single piece of legislation will have on all forms of social services could be enormous: families facing a medical crisis and unable to afford the care they need out of pocket could experience an inability to make their rent, afford food, or go to work as a result. In the strongest terms possible, The Financial Clinic condemns the Senate’s likely vote to repeal and replace the Affordable Care Act and – echoing the work from Professor Sherraden as a reminder of the holistic consequences this bill will fundamentally have on low income communities – implores the Senate to work to improve the ACA instead of dismantling it entirely.

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3 Steps to Maximize Financial Coaching Success

Megan Kursik, Assistant Director of Partnership Management, and Kristen McGuire, Development and Communications Associate | The Financial Clinic

“The only thing to do with good advice is to pass it on. It is never of any use to oneself.” -Oscar Wilde

We are so grateful to the Center for Financial Security (CFS) and Asset Funders Network (AFN) for passing on their advice to the financial coaching field: Last week, they released the results of the second annual Financial Coaching Census, disseminating recommendations for quality improvements based on our collective national experience. It’s thrilling that our field has grown to a point where we can meaningfully reflect on how to make it even more impactful. Luckily, it seems clear we all want the same things! Here are three strategies we can help you to implement, all identified as important areas for growth by the Financial Coaching Census:

  1. LEVERAGE TECHNOLOGY TO ENHANCE FINANCIAL COACHING

Financial coaching requires a lot of moving pieces, with a strong emphasis on “A LOT.” The amount of paperwork can feel overwhelming, between printed information for and from customers and written notes to track progress and outcomes. And if you work at multiple sites, you find yourself becoming the local bag-lady/gentleman. The Clinic created its web-based financial coaching platform, Change Machine, to lighten the figurative and literal load of coaching, transforming a filing cabinet of binders into a dynamic system of resources to learn the latest financial security strategies, print tools and worksheets for customers, manage cases and appointments, and connect with fellow practitioners across the country. Plus, managers and funders get the hard evidence they need that a program is effective through organic data collection and reporting.

  1.  EXPAND TRAINING AND ONGOING DEVELOPMENT OPPORTUNITIES

So many strategies, so little time! Many who work in social services struggle to find the time and resources to train staff, and this can be an even harder feat for the 48% who reported having integrated coaching models. Through years of experience building the capacity of over 360 organizations in 30 states, the Clinic’s team has designed concise, interactive trainings that support frontline staff to use financial security building strategies. We help financial coaches practice soft and hard skills to juggle strong customer engagement with data collection and provide organizational development sessions for program managers to fully integrate and oversee the coaching work. In-person trainings are supplemented with follow-up technical assistance calls and a monthly series of virtual trainings on Change Machine to continuously increase knowledge and skills. And an exciting new release – a brand new Train the Trainer curriculum provides all the tools you need to train new staff for years to come.

  1.  INVEST IN TARGETED RESEARCH AND EVALUATION

Just as the Financial Coaching Census builds the case for improving the field as a whole by collecting and analyzing the right data, we need to do the same for our individual programs to maintain relevance and impact. One of our priorities in creating Change Machine was robust data collection and reporting capabilities. Through an intake survey coaches use in the first meeting to get to know new customers (featuring questions from the Center for Financial Security’s Financial Capability Scale), data is collected to paint a picture of customer populations, including demographics and presenting issues. As the coaching process progresses, customer retention, engagement, and outcomes are consistently tracked. Managers can easily pull reports to review coaching performance, customer needs, and overall program success. This not only allows for program optimization and quantitative proof for funding, but also highlights systemic barriers facing customers and organizations and provides the data to make the case for lasting change (check out the Clinic’s Refund529 win for proof!). Best of all, reports can be customized to meet the specific needs of your program.

Conclusion

The results of the 2016 Financial Coaching Census offer proof that financial coaching is an inspiring and crucial field. Of course it is not without its challenges. Even when we know what we need to improve, actually implementing it is a whole new beast. But as we discovered in an Evaluation’s Endgame, the results are worth it. When you’re feeling a void in effectiveness — in technology, training, or evaluation — we’re here to help. Together, we can see our collective influence rise.

To learn how you can engage with the Clinic, contact our Assistant Director of Partnership Management, Megan Kursik.

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A Note on Congress’s New Budget

Defunding a Pathway to the American Dream

Mae Watson Grote | Founder and CEO | The Financial Clinic

united-states-capital

We learned on Monday that Congress has approved a crucial government program that gives struggling low-income families the opportunity to achieve the American dream. As somebody who has spent her entire career working for economic justice and a more inclusive economy, I am struggling to find a way to describe my reaction to this news: Discouraged, dismayed, or devastating hardly seems to cover it.

Every day we see customers who are working hard — multiple jobs, low wages, volatile hours — and yet they struggle to pay the rent or feed their family, much less invest in their future. The sobering reality of their immediate economic needs often stifles their larger dreams of owning a house or starting a business because of the financial chasm that lies menacingly in front of them, impeding that first step towards saving for anything more than next month’s rent.

For nearly two decades, AFI has forged that gulf through matched savings accounts: Individual Development Accounts (IDAs). IDAs are a critical tool for working poor Americans to build financial security by matching earned income deposits dollar-for-dollar to use towards life-changing assets: purchasing a first home, capitalizing a business, or funding post-secondary education or training. The matching funds are accompanied by support services, like financial education, credit repair and counseling, and guidance in obtaining tax credits. IDAs are particularly powerful because they recognize and address the stark reality that average incomes for so many American families leaves a gaping hole in their ability to afford a home or college education, crucial assets for building financial security for generations to come.

Simply put, we know that the absence of assets in low-to-moderate income families represents a fundamental barrier to economic mobility. The evidence also points to the fact that AFI does extraordinary work in helping Americans build their future. Without the latter, the former’s ability to achieve this on their own has just been become unnecessarily more difficult.

The Clinic stands with the principles of AFI; we will strive to not lose hope in these far-too-often trying times. Despite this devastating news, our work continues because the communities who need us most will continue to depend on our support and advocacy. Financial security, economic mobility, and the pursuit of a more inclusive economy are basic human rights that cannot be ignored, regardless of whether our current Congressional leadership rightfully recognizes them as priorities.

Advancing Financial Security Inclusion Through FinTech

Amy Cao | Program Associate | The Financial Clinic

Financial technology, dubbed FinTech for short, continues to grow rapidly as an industry, revolutionizing the landscape of financial service delivery. We are witnessing the onset of a changing tide — powered by smarter technologies — to improve the way we manage money.

Indeed, leaders of America’s largest banks and disruptive tech entrepreneurs alike have found common ground in utilizing web-based communication technology as a low-cost delivery channel for quality products and services. But within the sweeping waves of innovative development, there also lies an enormous opportunity that is too-often missed — to broaden the traditional financial consumer demographic and extend services to America’s financially underserved.

VISIONARY PRODUCT DEVELOPMENT FOR LMI POPULATIONS

Low-to-moderate income (LMI) households that have long been precluded from formal banking institutions and service providers could stand to gain the most from widely accessible product designs that depart from the traditional banking products and services model. Yet, many creative and cutting-edge FinTech tools are not developed with these populations in mind.

IDENTIFYING THE GAPS

Until recently, available data on low-income consumers’ needs and preferences have been largely unreliable or difficult to capture. According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, the underserved population consists of 9 million unbanked and 24.5 million underbanked households — almost 35 millions Americans effectively rendered “invisible” from the financial system.

This stark reality is not surprising, especially for those of us working in the field of financial coaching. At The Financial Clinic, customers get by on a median income of $17,000, and nearly 48 percent live below the federal poverty line. Underserved households pay considerably more for essential banking services like check cashing, bill pay, money transfers, loans, and so on. Recent reports from Change Machine show customers’ monthly financial transaction fees racking up as high as $80 for maintenance fees, $40 on check cashing, and $50 on money orders.

Without bank visibility, and with additional barriers such as immigration status or identity theft, these households bear a hefty premium on alternative financial services. Also known as “fringe” financial services, businesses like check cashers and predatory payday lenders claim they are serving communities that banks do not; and they’re not wrong. Since the 1990s, banks have withdrawn from local communities, particularly from low-income areas and communities of color, where branches were less profitable compared to higher net worth regions. With far fewer banks and credit unions per capita in LMI neighborhoods than in prosperous ones, it is no wonder that the unmet needs in “banking deserts” have enabled fringe enterprise to plant their roots and thrive, expanding by 15 percent each year.

UTILIZING FINANCIAL COACHING INSIGHTS

As a direct service provider, The Financial Clinic sources safe and reputable banking products offered by other organizations in the financial security field, FinTech start-ups, and even brick-and-mortar financial institutions looking to make an impact on the underbanked communities they serve. The Products Team derives insights about our customers’ needs directly from the coaching process using a mixed methods research approach and careful vetting. Synthesizing Clinic data collected from our web-based financial coaching platform, Change Machine, with customer stories and sample surveys, we are able to better understand trending issues in our customer community and determine the most appropriate and accessible tools and services necessary to complement our service delivery model both locally and at scale.

Much like the Clinic’s best coaching practices for developing savings plans or debt management strategies, many coaching conversations now center around the effective use of products, and setting a good rhythm to introduce new products as they come. The coaching relationship involves a great deal of trust in order to delve into sensitive financial issues, which, over time, fosters mutual accountability and confidence. For our coaches, maintaining this bond means being able to offer accessible and affordable options to our customers — nearly 50 percent of our customers still live below the federal poverty line despite 70 percent being active labor force participants. These persistent and widespread financial disparities call for inclusivity by product design, which FinTech and its very nature of swift and revolutionary transformation is perfectly primed to meet.

INCLUSIONARY PRODUCTS AND SERVICES

The Clinic applauds those companies and organizations that are laying the groundwork to leverage FinTech toward our shared goal of financial inclusion, better integrating the needs of low-to-moderate income populations with the evolving financial sector. CFSI has published numerous articles on the issue, including a report published last November on opportunities to reach the $9.1 billion underserved market. IDEO, known for their human-centered design approach, launched their very own non-profit wing, Ideo.org, which has formed coalitions across the financial security field to inform product development for underserved consumers. As a field leader, the Clinic has members of its staff on Ideo.org’s advisory council, providing input into the design of a whole class of projects to serve the financially insecure directly.

At the Clinic, we’ve begun implementing our very own vetting criteria to identify products that enable more effective and innovative programming from the service delivery process through to our customers, by promoting stronger outcome achievement.

The Clinic’s evaluation framework focuses on six key areas:

  • Mission and outcomes achievement and acceleration
  • Range and scope of service(s) offered
  • Accessibility regarding cost, eligibility, and functionality
  • Innovation and specialty in design or programmatic structure
  • Reputation and reliable sourcing, management, and support
  • Data security and transparent partnership

As one of the main pillars in the Clinic’s vision for lasting change, product integration allows us to recognize opportunities for compatible collaboration within the field of financial security and thereby broaden the scope and strengthen the value of the Clinic’s impact on the working poor nationwide.

The Clinic is proud to partner with Earn, an organization that offers the Starter Savings Program that rewards its participants after successfully completing a six-month consistent savings challenge, simply by linking the program to their existing bank accounts. For tech-savvy customers receiving SNAP, we also recommend the FreshEBT app by Propel, which helps users more actively manage their benefits by providing fast access to account balances, detailed spending and transaction history analysis, and location functionality that finds nearby EBT-accepting stores. The Clinic is also piloting the Focus Card by Community Financial Resources, a low-fee prepaid debit card for customers to receive and store their direct deposits, public assistance, and tax refunds, and includes an optional linked savings account through US Bank.

It is imperative that initiatives like these continue to grow and expand across the financial sector so that we can develop stronger insights about the vast diversities and unique challenges that characterize impoverished communities and better promote access for consumers at every level. The role of financial coaching here should not be underestimated in its ability to identify the needs of LMI individuals and families and to act as a trusted resource to recommend these innovations.

Having served more than 40,000 customers, Change Machine partners now in 23 states, and the financial security ecosystem launching nationally this year, we know firsthand that technology can be a powerful channel for social enterprise that enables scalable organizational impact for lasting change. We are committed to expanding this growth, which for us, means continuing to support marketplace innovations, while ensuring that financial products and services remain accessible, safe and relevant.


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An Evaluation’s Endgame for Programs: Challenges to Implementation

Haidee Cabusora | Chief Program Officer | The Financial Clinic

Editor: Kristen McGuire | Development and Communications | The Financial Clinic

RCT Implementation

Evidence-based impact. Third-party evaluation. Rigorous evidence.

In the words of Billy Joel, the phrases fill you either with sadness or euphoria. Nonprofits sit on one side of the spectrum — all doing amazing and impactful work — but not always prepared for the data collection, staffing, resources, or logistics of research and evaluation. On the other side, the external stakeholders, like government and funders, increasingly demand impact evidence for continued investment to ensure that dollars are spent on quality programs.

In 2012, the Urban Institute selected The Financial Clinic and Branches in Miami to participate in a random control trial (RCT), commissioned by the Consumer Financial Protection Bureau, on the impact of financial education and coaching on household balance sheets and well-being.

When its results were released, we were thrilled to see that the data conclusively demonstrates our financial coaching model and programs make a measurable difference in the lives of low- to moderate-income individuals and families. If you have a few hours and love appendices, you can find the full report here. But in sum, financial coaching works across a broad range of financial (i.e. savings and debt levels, credit scores) and well-being (confidence, attitudes, stress levels) outcomes. There were surprisingly no heterogeneous differences in outcomes achievements based on baseline financial or demographic differences. Most importantly for our mission, even the 40 percent of our participants on fixed incomes showed statistically significant results in savings frequencies and amounts.

Studying the results of the RCT provided a unique opportunity to further the Clinic’s vision of a financially secure America — lifting the proverbial hood of our programming and demonstrating what worked, for which low-income populations, and why. We hoped that we could make a contribution to this evolving field through scientific evidence and expand the boundaries for the new generation of financial coaching programs.

However, we soon realized that it would be a whole new challenge to actually implement the results in not just our financial coaching program, but our technical assistance and training, and the Clinic’s social enterprise, Change Machine. While the end-goal is easy to understand — improving the capacity to deliver high-quality programs — how to actually read the RCT results and interpret its findings into actionable items can be complicated for any organization:

Lack of formal experience.

Nonprofit program managers may not have the education, know-how, or personal experience in concepts like intent to treatment vs. treatment on magnitudes and scales. Likewise, even organizations with dedicated staff members who focus on data analysis still may not have this specialized research knowledge. Without this base, the process of assigning weights to findings can be difficult. There is always the additional risk that organizations will focus on the findings that reinforce existing assumptions or desires.

The Solution: We institutionalized the implementation of the RCT results by quickly following up their public release with a prominent place in the annual organizational work plan. Within weeks, we began marshaling resources to ask ourselves which findings we would focus on, how it would impact our programs and capacity building, and where we should start. We developed a continuous quality improvement process, D3, named for John D. Rockefeller’s practice of keeping his accounting figures to the third decimal for an additional level of granular information. The D3 process focuses on identifying a problem, uses powerful questions to narrow down a set of hypothesis and creates a collaborative forum to discuss, test and collect data. Lather, rinse, repeat.

In this way, our team methodically worked through the 34 findings of the RCT to identify the next steps for our program. We asked:

  • Is this metric important for our work?
  • Should the result change the way we do services?
  • Is our financial coaching platform (Change Machine) set up to facilitate progress in this area?
  • Are there specific questions (or other data collection changes) that we should be asking individuals in subsequent meetings?

Staff expectations and fatigue.

Even if results can be immediately applied, there remains a lengthy process of having staff understand the results and prepare them for new changes. Programs are acutely aware of the dangers of “air dropping” new procedures and so even those that come from evaluations must compete for spots on a long line of improvements to meet contract deadlines, capacity issues, or the many factors that daily programming encounter. With attention towards minimizing staff turnover and burnout, it’s challenging to keep up morale in realizing the work isn’t over when RCT results are received — the real finish line is optimizing programs based on the results.

The Solution: First, the top of the organizational chart and down consistently clarified and reinforced the motivation for participation — within the context of organizational mission and vision — throughout the entire period of participation and implementation. The talking points were simple:

Financial insecurity is pervasive but resources are limited.

Mission: For those we serve directly, how can our model reach more customers in a better way?

Vision: For those we cannot serve but who we can impact (1,000,000 by 2020), how can leveraging our experiences be helpful to other programs and stakeholders?

Within this framework, it was easier to implement the results because the connection to our everyday was clear and consistent. It also allowed us to work collaboratively across departments on a single finding. For example, if the RCT showed coaching could improve debt repayment on 90-to-180 day balances, we could begin by ensuring that financial coaches highlighted or prioritized this step with customers, then expand that to refine our training on specialty debt topics and add new measures to track in our data collection so those beyond the Clinic’s own coaching customers could benefit from this finding.

Funding.

Resources can be scarce in supporting implementation of results. It is an exaggeration to say that once the lights flip on, the party is done. But the focus may continue to be on the static results and not what should happen next. For programs and fundraising, there is pressure for brand-new innovation, rather than implementation. While programs are typically refining their models as part of their day-to-day, the additional resources to incorporate a large study across different departments may not be planned for or preemptively funded.

The Solution: We emerged from our D3 process with a roadmap for improving our models, programs and resources with evidence from the RCT to keep the Clinic on the cutting-edge of innovation and outcomes, and relevant for funding:

  • Well-being metrics. Prior to the findings, the Clinic hadn’t formally incorporated any explicit outcomes on improved attitudes, feelings, or levels of confidence. There were concerns about their subjectivity, and we believed that the coaching process was already focused on empowering customers and therefore pure financial indicators would reflect this process. As a result of the RCT, we decided that not only would we permanently embed the Center for Financial Security’s Financial Capability Scale (which includes a question on confidence), we would also incorporate the Consumer Financial Protection Bureau’s Well-Being Scale.
  • Goals calculator. The Clinic’s most emphasized coaching mantra is that “goals are the driver.” One of the findings that we were especially pleased about were the positive impacts on confidence in achieving goals. The tech team created a significantly improved goals calculator on Change Machine that allows customers to play with date ranges and savings amounts to create an action plan that best meets both motivation and capacity.
  • Customer dashboards. Program managers need help synthesizing all the data that coaches input. The Clinic has come a long way in continuing to develop robust dashboards within Change Machine for tracking individual customer progress, a coach’s overall performance, and a new manager portal for access to easily customizable reports. We are now currently moving towards using the actual results as benchmarks for coaching performance by building it into the logic of the system.
  • Ecosystem. We also launched a financial security ecosystem last year, thanks to JPMorgan Chase, with New York City workforce development programs. Its theory of change is simple. Since financial insecurity is pervasive, a broad range of nonprofits and agencies who focus on low-income populations can better achieve their respective missions by incorporating financial coaching techniques. In workforce development, the job placement specialist knows that the jobseeker will get more employment offers if he or she has better credit and will stay on the job longer if he or she deals with wage garnishment before the first paycheck, so we are teaching those specialists the promising practices highlighted by the RCT. We reserve the most acute and persistent cases for an on-site financial coach who can provide the high impact, intensive coaching that the RCT proved is effective.

CONCLUSION

Conducting an RCT and implementing its results is extremely challenging, but possible — and worthwhile. After more than a year, we can see the extent to which the RCT has shaped our work by using the results to define improvements in all levels of the organization. We won’t stop there! With a new and improved model for our programs and partnerships, the Clinic continues to grow rapidly. As a practitioner-driven organization, we hope our experience can support other organizations to make research a part of their DNA.


Next up: Watch Clinic coaches discuss the human side of the RCT!

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The Pursuit of Lasting Change

WorkBOOST’s premise is very straightforward: By building financial security, we are going to amplify your programs’ workforce outcomes. And, that’s not just a theory of change. What we are trying to do is make a business case about it. As Mae [Watson Grote] referred to earlier, we are seeing early evidence of increased participation, completion rates, hourly wages going up, and fabulous work by our partners.

5 Easy Ways to Make the Most of Your Tax Refund

Karen Goodheart | Assistant Director of Financial Coaching | The Financial Clinic

You may hear the Imperial March in your head when you think of tax season, but fast forward — past the hassle of collecting your paperwork, struggling to keep your heart rate low as you triple check that everything is in order — to the moment when you receive that once-a-year reprieve from the government in the form of a tax refund. According to early 2016 numbers, an overwhelming majority of filers — nearly 80% — received a substantial refund averaging $3,053. Not a bad reward for your past year of hard work! This year, make it even more meaningful using these top strategies for maximizing your tax refund:

1. Faster is Better

Have your refund direct deposited into your bank account — when you go to your tax preparer, be sure to bring your banking information (that is, your bank account number and the bank’s routing number). Having your refund directly deposited is quicker and safer than getting a check in the mail. If you don’t have a bank account, you can have your refund directly deposited onto a prepaid card. (Speak with a financial coach to enroll in a new prepaid card offer which in most cases has no fees plus has a saving capability.)

2. Make it Last

Deposit your refund into a savings account, then set up monthly transfers to your checking account — you’ll have “extra” money each month! Imagine, for example, the average $3,000 refund broken into $250 each month. With this constant flow of money, paying bills has never been easier. You may also want to split the refund from the start to have a portion going into checking to pay down existing bills and the rest into savings to go towards your financial goals.

3. Reward Yourself

You’ve worked hard, and you deserve it! Stay mindful of your financial situation, but don’t be afraid to put some of your refund aside for yourself. Your future self can appreciate it even more — use your refund as the basis for saving for your most passionately held financial goal, like a fabulous vacation, your dream home, or starting your own business.

4. A Fresh Start

A tax refund is a great opportunity to clean up your financial house, paying off lingering debts or finally starting that emergency savings. It’s also the time to rethink your W-4: if your refund was large because you had a lot taken out of each paycheck, consider lowering your withholding so that you can be the one using that money throughout the year. Check out paycheckcity.com for help determining the perfect balance.

5. Double Down on Savings

There are several options to consider that will even help you with next year’s taxes!

  • Save for Retirement: Open up an IRA and have all or part of your refund put into the IRA. If you open the IRA or add funds to an existing IRA before April 15th, 2017, the amount you put in will count as a deduction on your 2016 taxes.
  • Save for College: Open a 529 account for your children’s or grandchildren’s college education. In New York State, a new law was just passed which allows your tax refund to go directly into a 529 college savings account. You’ll also be able to split your refund so part can go into the 529 and part into your checking or savings account.
  • Save year round: If you are struggling to pay your monthly bills or you want to find a little extra each paycheck for your savings, check with your employer’s human resource department to see if changing your federal and state exemptions could help in keeping up with your reality. Remember that your refund may be less come next year, but you will have greater control over your money to meet your expenses today rather than waiting until next year.
Be sure you are receiving the full refund you deserve — see the IRS’s credits and deductions page to determine what you are eligible for. Plus, depending on your total 2016 income, you may be eligible for VITA tax preparation program or free e-filing.

Share your favorite uses of tax refunds below!


College Savings for Millions of New Yorkers

Through November, like many of you, we were feeling wary about how the election will impact the communities we care about. Working poor families will be hit hard if the federal resources that help them make ends meet are weakened or destroyed.

The Burden of Student Loans

The Burden of Student Loans

The average 2016 college graduate has $37,172 in student loan debt.

A Fresh Look at Possible Solutions

Going back to school is always filled with anticipation, excitement AND stress. Now, more than ever, stressors about handling the costs of an education are on par with academic challenges. The average 2016 college graduate has $37,172 in student loan debt, creating a burden that lasts long past the college years and often sidetracks important life choices. Overall, student loan debt hit $1.26 trillion in the third quarter of 2016; more than double from 10 years ago.

With over 43 million Americans impacted by student loans, it is a chronic phenomenon which is fast becoming a crisis across all 50 states. The consumption of college debt not only envelopes students but their friends and relatives who co-signed the loans as well.

Print and broadcast media have spotlighted the problem and ways to initially avoid debt. Rightly so. For the majority of students, loans — at considerably large amounts — are an inevitable part of the college experience. However, there isn’t a significant amount of information available on what to do after the deep dive into debt, and more specifically, the identification of strategies to lessen the pay-back load once accrued. Based on The Financial Clinic’s financial coaching experience with 21% of customers burdened by an average of $27,776 in student loan debt, we have developed a few strategies to deal with just that. As a result, our customers have paid off a total of $392,000. It should be noted, however, that these strategies are not one-size-fits all but rather a look at a range of opportunities for ameliorating the student loan burden.

What are the different kinds of student loans?

Simply put, there are two kinds of loans: federal and private. Federal loans include Stafford (FFEL), Grad PLUS, Parent PLUS and Perkins Loans. The records of all existing federal loans are housed in the National Student Data System. They can be accessed by creating and logging in with a Federal Student ID.

It is also important to note that some federal loans are subsidized (the government pays the interest until repayment begins); others are not. Direct Subsidized Loans are available to undergraduate students with financial need, which is determined by taking the cost of attending a school minus one’s expected financial contribution. Perkins Loans are another type of need-based, subsidized loan, and these are available to graduate students as well as undergraduate students. Direct Unsubsidized Loans are available to both undergraduate and graduate students with no requirement to demonstrate financial need. Some agencies (like New Jersey Higher Education Student Assistance Authority or HESAA) present a misleading picture. Through various marketing tactics, such as a name that could easily be assumed to be associated with a government body, they lead students to believe they are offering federal loans, when in fact the loans HESSA offers are private loans. If you are considering taking out a student loan, a good rule of thumb to follow is this: If receiving the loan requires completing any paperwork outside of the FAFSA, forms on www.studentloans.gov, or authorizations through your school, it is most likely a private loan. If you’ve already borrowed loans, and are not sure whether it is federal or private, the best way to find out is to simply call the lender and ask.

Private loans are borrowed directly from a financial institution, rather than a government agency. Interest and loan amounts are market rate and based on credit, not financial need. They are typically offered at less favorable terms than federal loans and usually cover the gap between federal loans and other forms of financial aid, and total education expenses. Anybody who meets the credit and income requirements put forth by the lender is eligible for a private student loan.

Strategies for Holders of Federal (only) Student Loans

First and foremost, one must never miss a payment or default on a loan. Doing so will reduce the repayment options available to the borrower, cost the borrower more in the long run, and negatively affect the borrower’s credit history. If the borrower is unable to make a payment, they must call their lender to make arrangements as soon as possible, because as soon as a payment is missed, the loan becomes delinquent. In the case of short-term relief, the borrower may qualify for a loan deferment or loan forbearance. Deferment is a period of time when the borrower is not required to make payments on the principal or interest of the loan, and no additional interest will accrue on any Direct Subsidized, Subsidized Stafford, or Perkins Loans. Deferments are available for a variety of circumstances and can last up to three years. Forbearance is similar to deferment but with some marked differences, the first of which being the payments may only be reduced, not completely suspended. Additionally, interest will continue to accrue on all subsidized and unsubsidized loans. The factor of whether or not interest will accrue or not generally makes deferment a better option for most borrowers if they qualify for it.

Income-Driven Repayment Plans

Apart from winning the lottery, there are several ways to repay federal student loan debt. By far, the most popular are income-driven repayment (IDR) plans. These plans are available to borrowers who may be delinquent but are not in default. There are a variety of IDR plans: Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR). With IDR plans, monthly payments are capped, can start as low as $0/month, and may fluctuate based on a reasonable percentage of income and family size. Debt forgiveness may be available after just 10 years of full, on-time payment for borrowers in the public and nonprofit sectors. For other borrowers, the repayment period may extend to 25 years. Be sure to note, however, that extending one’s repayment plan beyond 10 years will lower monthly payments but drive up the amount of interest paid over the life of the loan. Anyone with an interest in pursuing “public service forgiveness” should enroll with an IDR plan to maximize the amount of student loan forgiven. (studentaid.ed.gov/sa/sites/default/files/income-driven-repayment.pdf)

Direct Consolidation Loan Program (DOE)

All borrowers with federal loans are eligible for consolidating these loans under the US Department of Education’s (DOE) Direct Consolidation Loan program. On the one hand, this can move borrowers with multiple student loans into a single, and more simple, payment plan; lower monthly payments by extending the life of the loan to 30 years; and set a fixed interest rate, determined by the weighted average of interest rates on all previous loans. This particular program also makes the borrower eligible for all federal repayment programs including the IDR plans above.

On the other hand, if the borrower stretches the life of the loan to 30 years, they may end up paying out more loan installments and greater interest over the long term. One may also lose borrower benefits (e.g., discounted interest rates and discharge or forgiveness accommodations) from an existing relationship. Furthermore, if a borrower is interested in consolidation as a way to get loans out of default, it’s important to note that consolidation does not remove negative remarks or accounts of old loans from one’s credit report.

Loan Rehabilitation

Although defaulting on a federal student loan is by and far something a borrower wants to stay clear of for many reasons (e.g., it does significant harm to a credit score), there are a couple of options for addressing the issue if it occurs, besides the rare case that the borrower is able to repay the full amount outstanding. The most popular choice is to go through a loan rehabilitation program. The program enables the borrower to bring a loan current by making affordable payments over a specified period of time. This is a one shot deal. A borrower cannot rehabilitate a federal student loan more than once. Private loans cannot be rehabilitated.

Loan rehabilitation is for borrowers who need a more flexible, short-term monthly payment schedule and don’t have an immediate need for a “cleaner” credit report. The borrower must make 9 “reasonable and affordable” voluntary payments within 10 months. These payments can be as low as $5/month. As such, borrowers may find more flexibility in this option than with consolidation. The borrower will also become eligible for additional federal student aid after the 6th payment. Loans are not fully out of default, however, until after the 9th payment is made. At this point, all negative information regarding the loans is removed from the borrower’s credit report. In addition to an improvement in credit, after a loan is rehabilitated the borrower is now eligible for all federal repayment options, including the aforementioned income-driven repayment plans.

Additional Options for Federal and Private Loans

Along with the strategies mentioned above for federal student loans, both federal and private student loan borrowers may also refinance or consolidate loans through financial institutions or other lenders. Along with banks, many private companies have recently started refinancing federal and private student loans. However, a federal student loan borrower must be thoughtful about the advantages and disadvantages of doing so. By moving out of the federal loan system, these borrowers should be aware they will lose certain benefits like public service loan forgiveness and, most likely, will not have as many options to reduce payments in case of loss of income. With regards to income, and credit as well, a borrower must be in relatively good standing. Additionally, some lenders require that borrowers have already completed their degree.

For people who are contemplating this path and qualify accordingly, they can save themselves a significant amount of money by reducing existing interest rates. The bottom line is that going private with refinancing or loan consolidation can make good sense for borrowers with an anticipated secure income for the expected duration of student loan repayment and who are not interested in public service loan forgiveness.

Borrower Beware

In addition to legitimate companies offering refinancing of student loans, there are also many companies (such as Student Loan Assistance Center or Student Debt Relief) marketing “consolidation” services which do nothing more than enroll borrowers into an income-driven repayment plan — and charge the borrowers hundreds of dollars to do so. They advertise the best possible outcome ($0/monthly payments and debt forgiveness after 10 years) as though they are available to every borrower and are programs separate from what is already offered by the Department of Education. However, the reality is the most people will not qualify for $0/month payments or Public Service Loan Forgiveness. Borrowers should never pay to enroll in any type of repayment program and should know that if something sounds too good to be true, it is.

Some Final Thoughts

There are many different options for paying off student loan debt or moving a loan out of default. In evaluating these options, the borrower must keep in mind the following factors.

  • Are the loans private or federal?
  • What is the current status of loans: current, delinquent, or defaulted?
  • What is the borrower’s current income and do they anticipate changes to income or career?

The US Department of Education’s “student loan repayment calculator” is also quite helpful in determining the best course to take.

Finally, it is important to remember that is the goal of ALL lenders to be paid back. Most will work out options to help the borrower get back on track.