Teaching Consumer Credit at Home

Consumers need to know how to manage their credit.1 Yet, many barriers keep people from participating in consumer credit classes.2 These barriers include lack of time and money, inconvenient scheduling or location of classes, and even lack of confidence. To meet the educational need while also addressing barriers to participation, University of Wisconsin-Extension faculty developed Using Credit Wisely, an audio- and print-based consumer credit distance education program.3

The program consisted of three units of three audio and print lessons each: "Evaluating Consumer Credit Decisions," "Managing Your Credit Load," and "Resolving Consumer Credit Problems." This learn-at-home program was pilot-tested in four northern Wisconsin counties in 1987-88. An evaluation study gathered information for program revision and to learn about the process distance education learners went through as they used the materials. The findings were both surprising and encouraging.

Single and married adults 18 to 45 years of age were the target audience for Using Credit Wisely because families in the beginning or expanding stage have heavy demands on their finances and are frequent credit users.4 A total of 161 people participated in the pilot program. More than half (53%) of the people who turned in the evaluation (about 60%) were under 35 years of age with 75% below age 45. Sixteen percent were under age 25. Seventy-five percent were married, and 78% came from two- person households. Formal education varied from less than a high school education (5%) to some technical school/college (23%) to university credits earned (44%). Almost three-fourths of the participants (73%) had family incomes under $30,000, with 52% having family incomes under $20,000.

While more than 40% owed $5,000 on installment loans, 19% had no such loans. Further, 29% owed more than $1,000 on credit cards. Reporting on problems with their credit use, 63% felt they were paying too much for credit, 54% had "too much debt," 28% were denied credit, and seven percent had lost an item due to missed payments.

A random sample of 33 participants were surveyed by telephone three to six months after enrolling in the program. The survey indicated that participants had significantly reduced their consumer debt and made changes in their credit, spending, and saving behaviors.

Matched pre/post data comparing total consumer debt and income was available for 23 of the program participants who were part of the final random evaluation survey. The debt for each of these families was calculated by dividing their net income by the amount of their consumer debt. Families with consumer debt in the 16%-20% range were considered fully extended. Those with consumer debt loads over 20% are considered to be overextended and may experience difficulty repaying loans.5 When participants began the program, 51% had 20% or more of their take-home pay committed to consumer debt. After the program, the debt level fell to 35%, a statistically significant (p=<.01) decrease.

Sixty percent of survey respondents indicated they'd made changes in their use of consumer credit because they'd participated in the program. They reported using their credit cards less, trying to pay off outstanding balances, paying more attention to the cost of credit when evaluating credit decisions, and gaining a better sense of control managing consumer credit. Participants also reported changes in the way their families spent or saved their money. They said they tried to be more careful in their spending, kept track of expenses, identified financial goals, and communicated with their creditors.

Randomly selected participant interviews also underscored the effectiveness of this home study approach:

• Nontraditional delivery of consumer credit information attracted new audiences to Extension. More than 80% of the participants reported this was their first use of Extension as a source of consumer credit information.

• Most importantly, 96% of participants stated a strong preference for distance education.

While Using Credit Wisely appeared to produce desirable changes in the credit management practices of participants, it also required changes by those involved in the planning, production, implementation, and evaluation of this learn-at-home program. Extension faculty contemplating developing such a program should consider the following:

• The time from educational program inception to delivery is lengthy (1-2 years), but it can be offset by the longer life of the program, as well as the ability to offer it continually.

• Content and delivery expertise brought together in a design team is important for a successful program. The team should include not only Extension field staff and content specialists, but also adult educators and media/design specialists. The process is slower, but the outcome will be worth the investment.

• Targeted marketing efforts are necessary, in addition to regular Extension marketing routes. In this case, the course was marketed through a variety of channels, including lending institutions.

• Learner enrollment and progress must be systematically monitored as a result of varied times of enrollment, unique student needs, and different pacing through the materials.

• Distance education methods place increased responsibility on the learner and you're not there to help. Assist the learner in the materials with helpful hints on how to best use the educational materials provided.

• The greatest need for learner support is during the initial period of their enrollment. Call or send a post- card noting your willingness to help in any way. Taper off as the participant progresses through materials. This contact aids learning, satisfaction, and retention.

• When evaluating, use telephone interview techniques to ensure representative evaluation results. Those who are too busy to come to your program in person may not always find the time to respond to an evaluation survey either.

Using Credit Wisely required considerable resources for initially developing and implementing a program that would overcome barriers to participation. After reviewing the impact of the program in terms of resulting changes in consumer credit behavior, including a statistically significant decrease in consumer debt and new clientele for Extension, the benefits more than justified the time and expense.

1. J. M. Muller, "A Managerial Systems Approach to Money Management Practices Influencing Household Solvency Status" (Master's thesis, University of Illinois, Champaign, 1984).

2. K. P. Cross, Adults as Learners (San Francisco: Jossey-Bass, Inc., 1981).

3. Funded through the Beckner Foundation and a University of Wisconsin System Faculty Renewal grant.

4. Federal Reserve Board, 1983 and 1986 Surveys of Consumer Finances (Washington, D.C.: U.S. Government Printing Office, 1983 and 1986).

5. E. T. Garman, S. W. Eckert, and R. E. Forgue, Personal Finance (Boston: Houghton Mifflin Company, 1985).