From debt to savings: Using the framework of loan payments to help low-income people build assets


We propose that the framework of monthly loan payments provides an opportunity for people to save while repaying debt. In an intervention with a credit union partner, we designed a savings product in which members could save money by adding a small amount to their monthly loan payment that is contributed directly towards savings. When this product was offered by default, 38% of members taking out a loan chose to save while repaying their loans. We project that these members will save an average of about $1,000 over the term of the loan, based on their current savings plans. We provide implications for financial service providers and policymakers, suggesting that these combined loan/savings products provide a unique opportunity to encourage asset building among people paying down loans.

New York, NY