Drop-Out From Individual Development Accounts: Prediction and Prevention

Individual Development Accounts (IDAs) are a new policy instrument designed to help the poor save and accumulate assets. IDAs provide matches for savings used for home purchase, post-secondary education, or microenterprise. IDAs cannot help participants, however, if they drop out. What determines drop-out, and what can be done to help participants to stay in? Three findings emerge from an analysis of IDAs in the American Dream Demonstration. First, drop-out depends more on transaction costs and previous debt than on income. Second, program design –and match rates in particular–affect drop-out risk. Third, drop-out can be predicted with some accuracy, so IDA programs could use statistical targeting to identify candidates for special preventive attention before they drop out.

Project: American Dream Policy Demonstration (ADD)