Docstoc

Evaluation of the National Ways to Work Program

Document Sample
Evaluation of the National Ways to Work Program Powered By Docstoc
					2011 Evaluation of the National
      Ways to Work Program
            Prepared by ICF International, Fairfax, VA
                                 BACKGROUND



Ways to Work (WtW) is a unique federally certified Community Development
Financial Institution (CDFI) based in Milwaukee, WI. Through our network
of loan offices across the country, we provide small, short-term, low-interest
loans to hardworking credit-challenged families. We provide an alternative to
predatory lenders for people with a demonstrated commitment to achieving
increased self-sufficiency.


All of our loan offices are hosted within family-serving member agencies of
the Alliance for Children and Families. This ensures that our borrowers have
ready access to a wide variety of services to help them be successful with
their loan and with the change in lifestyle that this typically requires.
                                    ACKNOWLEDGEMENTS



WtW would like to acknowledge the following individuals and organizations for their generous
support of the program and evaluation studies:

Our borrowers who continually inspire us with their efforts to transform their own lives;

The WtW Board of Directors who give so generously of their time and resources;

The dozens of family-serving agencies that deliver the WtW program to their communities
across the country;

The staff of WtW and our sister companies within the Families International group of
companies: The Alliance for Children and Families, United Neighborhood Centers of America
and FEI Behavioral Health;

TransUnion, Inc. for their thoughtful collaboration with us on multiple evaluations and
ongoing studies;

The CDFI Fund of the U.S. Department of the Treasury for their financial support of the
ICF study.
WAYS TO WORK BOARD OF DIRECTORS             John A. Shutkin
AND KEY STAFF                               General Counsel
                                            CliftonLarsonAllen LLP
J. Hunter Atkins, Board Chair               Milwaukee, WI
Chairman
The Bank of Nashville                       Burton Sonenstein
Nashville, TN                               Vice President & Chief Investment Officer
                                            Annie E. Casey Foundation
Milton J. Little, Jr., Vice Chair           Baltimore, MD
President & Chief Executive Officer
United Way of Metropolitan Atlanta          Stephen Mack
Atlanta, GA                                 Chairman
                                            Alliance for Children & Families
Timothy P. Hanley, Secretary/Treasurer      Board of Directors (ex officio member)
Partner, Deloitte & Touche
Milwaukee, WI
                                            WAYS TO WORK MANAGEMENT
Jennifer L. Dorn
Chief Executive Officer                     Susan N. Dreyfus
American Academy of Physician Assistants    Chief Executive Officer
Alexandria, VA                              Families International, Inc.


Donald H. Goughler                          Jeffrey E. Faulkner
President & Chief Executive Officer         President
Family Services of Western Pennsylvania     Ways to Work, Inc.
Pittsburgh, PA
                                            John R. Schmidt
William J. Grinker                          Chief Financial Officer
Senior Advisor                              Families International, Inc.
HR&A Advisors, Inc.
New York, NY                                Wendell E. Willis
                                            Vice President of Operations
Scott W. Humphrey                           Ways to Work, Inc.
Executive Managing Director
Head of U.S. Mergers & Acquisitions         Matthew L. Mueller
BMO Capital Markets                         Vice President of Funding Support Services
Chicago, IL                                 Ways to Work, Inc.


Krista Larson                               Linda Brost
Executive Director                          Vice President of Business Development & Marketing
Metropolitan Family Service                 Ways to Work, Inc.
Portland, OR

Donald W. Layden, Jr.
Partner, Quarles & Brady LLC
Operating Partner, Baird Venture Partners
and Baird Capital Partners
Milwaukee, WI
                                                   TA B L E O F C O N T E N T S


   An evaluation study such as this is
only accomplished through much hard
      work and valuable contributions.
 WtW wishes to thank the individuals
   at ICF International for their efforts.


                                                   E X E C U TIV E S U MMA RY
                                               i   Introduction
                                             iv    Major Findings by Study
                                             vi    Conclusions and Recommendations


                                                   P R OGR A M OU TC OME S S TU D Y
                                              1    Introduction
                                              2    Roles of the National Office and Local Sites in Program Delivery
                                             12    What Is the Starting Point for Ways to Work Borrowers?
                                             16    Findings from the Borrower Survey
                                             30    What Local Site Activities Produce Successful Participants?
                                             36    Conclusions


                                                   C R E D IT IMPA C T S TU D Y
                                             38    Introduction
                                             41    One- and Two-Year Changes in Credit Score
                                             45    Longitudinal Score Trends for Earlier Borrowers
                                             49    Comparison Study
                                             51    Conclusions and Future Directions


                                                   R E TU R N ON IN V E S TME N T S TU D Y
                                             53    Introduction
                                             57    Components of ROI Results by Stakeholder Group


                                                   A P P E N D IC E S
                                             65    Appendix A: Propensity Score Matching Details
                                             69    Appendix B: ROI Methodology and Citations
                                             75    Appendix C: Borrower Profiles
                                             85    Appendix D: Ways to Work Background
Executive Summary
                                                          Ways to Work 2011 Evaluation Executive Summary




                Ways to Work
          2011 Evaluation Final Report


1. Executive Summary
1.1. Introduction
In March 2011, Ways to Work, Inc. commissioned ICF International, a Fairfax, Virginia, based
consulting group, to conduct three studies exploring the extent to which the program is having
its intended effect. The evaluation is guided by four primary evaluation questions developed in
partnership with Ways to Work staff:

        What are the short-term individual and family outcomes associated with participation in
        the Ways to Work program? Is there a link between program activities and outcomes for
        borrowers?
        What is the impact of participation in Ways to Work on borrower credit scores? How
        does this impact compare to those of non-participants with similar baseline credit
        scores?
        In what ways does participation in the Ways to Work program result in a net financial
        gain for stakeholders?
        In what ways are individuals who participate in the Ways to Work program able to
        achieve a higher degree of economic security (e.g., income covers expenses, saving for
        future goals, ability to withstand unexpected financial crises)?

In addition, the evaluation is guided by a program logic model developed through discussion
and interaction between Ways to Work and ICF staff (see Figure 1-1).




December 2011                                                                                          i
                                                                                                                Ways to Work 2011 Evaluation Executive Summary

                                                   Figure 1-1. Ways to Work Program Logic Model

                                                                      Short-Term                     Intermediate                    Long-Term
                Inputs                    Activities
                                                                      Outcomes                         Outcomes                      Outcomes
 •National Services           •National Activities          •National and Local             •National and Local            •National and Local
  •Local site capacity         •Select sites and guide       Outcomes                        Outcomes                       Outcomes
   support                      management                   •Current employment of          •Removal of barriers to        •Economic stability for
  •Ways to Work loan           •Raise loan funds              participants is protected       employment by                  participating households
   system                      •Provide underwriting of      •Job attainment of               promoting reliable            •Loan repaid in full
                                agencies                      participants enhanced           transportation, which
  •Program stewardship                                                                                                      •Households reduce
                               •Provide IT systems            by promoting increased          reduces work absence or        reliance on public
                               •Provide local funding         mobility                        tardiness
                                support
                                                                                                                             assistance programs
                                                             •Increased job readiness        • Financial literacy skills    •Households can access
                               •Perform loan origination                                      translate into job skills
                                servicing
                                                              by increasing access to                                        traditional financial
                                                              training and skill building    •Increased income for           markets due to
                                                             •Transportation time             participants from              increased credit scores
                              •Local Activities
  •Local Services                                             reduced for participants,       reliable transportation        Participants can increase
                               •Intake assessment
   •Market the program                                        freeing time for family        •Increased                      their annual wages
                               •Financial education and
   •Manage loan                 credit education              involvement, education,         creditworthiness of
    committee                  •Loan payment counseling
                                                              or more work hours              participants to access
   •Provide case                and case management          •Increased financial             additional assets
    management and cross-       mirroring real world          literacy and participants      •Better care for children
    referrals                   borrowing                     encouraged to open              supported with more
   •Partner with mechanics     •Car maintenance               savings accounts                access to child care
                                counseling                   •Building of soft skills by      programs, after school
   •Process asset purchase
                               •Collection of loan in its     improving self-esteem           activities, and health
                                entirety or vehicle                                           care facilities
                                repossession
                               •Client borrower
                                underwriting



                   CONTEXT:
                   •Household is in a state of economic instability.
                   •Household/applicant is a parent who is working and/or in post-high school education.
                   •Household/applicant has limited access to traditional, affordable & responsible credit resources.



December 2011                                                                                                                                                ii
                                                         Ways to Work 2011 Evaluation Executive Summary

The Ways to Work program is designed to meet the immediate needs of low-income working
families by providing skills and knowledge to build and maintain financial security. The program
provides Ways to Work borrowers with low-cost financing for a car, with no down payment
required. To identify borrowers that will be successful at repaying their loans, Ways to Work
uses character-based lending. Instead of basing the provision of the loan on borrowers’ credit
scores, the loan officer evaluates each borrower’s work history and motivation to improve his or
her economic situation. To obtain a loan, borrowers must submit a statement of why they
deserve to have a Ways to Work loan and demonstrate that they will monitor their income and
expenses to pay back the loan by developing a household budget. Their monthly loan payments
are reported directly to two of the three major credit bureaus (TransUnion and Experian),
establishing for them a pattern of creditworthiness.

A 2006 evaluation of Ways to Work indicated that having access to a car contributed to
improving borrowers’ financial situations. Recent economic conditions suggest a need to
examine if this trend continues and how the Ways to Work program addresses its target
population of low-income families that are typically adversely affected by current economic
conditions. In addition, since the 2006 evaluation, Ways to Work has restructured its program
model. The evaluation, therefore, also examines how this restructuring has affected
implementation of the program at local Ways to Work sites.

With this information in mind, the ICF Evaluation Team conducted three distinct studies:

    1. Program Outcomes Study: The Program Outcomes Study addresses the outcomes
       associated with participation in the Ways to Work program and the link between program
       activities and these outcomes for borrowers. It also examines the economic security of
       borrowers. The survey of recent borrowers with loan start dates between 2007 and 2010
       captures changes in employment, income, education, and financial management since
       enrollment in the program. The survey also examines borrowers’ impressions of the
       impact of the program in these areas. An additional survey of local sites provides
       information on how each site delivers the program and supports the borrowers to
       successfully repay their loans.

    2. Credit Impact Study: The Credit Impact Study examines the impact of the program on
       borrower credit scores. We compare borrowers’ baseline credit scores with their scores
       one and two years after receiving the loan. We examine longitudinal changes in scores
       for borrowers who received loans between 2001 and 2003. We also constructed a
       comparison group based on the characteristics of borrowers who received loans
       between 2007 and 2009, and we analyze the two groups’ changes in credit score.

    3. Return on Investment Study: The Return on Investment Study quantifies the net
       financial gain for stakeholders that results from the Ways to Work program. Stakeholders
       include borrowers, employers, taxpayers, and local lenders. Measures considered
       include employment-related savings from owning a car, savings from avoiding predatory
       lending products, and savings from reduced reliance on public programs.

Combined, these studies provide a comprehensive examination of the implementation of the
Ways to Work program model from 2007 to 2010.




December 2011                                                                                         iii
                                                           Ways to Work 2011 Evaluation Executive Summary

1.2. Major Findings by Study
The findings from each study are reported in the body of this report. Cumulative findings from
the studies and relevant conclusions follow.

1.2.1. Program Outcomes Study
Key findings from the Program Outcomes Study indicate the following:

        Borrowers are able to increase their wages after participating in the Ways to Work
        program. Of the 318 respondents who report having an income, 47 percent indicated
        increases in their income since taking out the loan. Thirty-five (35) percent experienced
        an increase of more than 10 percent.

        Ways to Work borrowers are advancing their educational careers after receiving their
        loans. About 26 percent of respondents indicated increases in their educational
        attainment since receiving the loan. The most common transition was going from a high
        school degree to completing some college courses.

        More Ways to Work borrowers joined the mainstream financial marketplace after
        receiving their loans. Of the 114 survey respondents who did not have a checking
        account at the time of the Ways to Work loan, 50 percent have opened a checking
        account since receiving the loan. Of the 194 respondents who did not have a savings
        account at the time of the Ways to Work loan, 35 percent have opened a savings
        account since receiving the loan. Twenty-four (24) percent of respondents indicate they
        have taken out another secure loan to support household needs since the Ways to Work
        loan.

1.2.2. Comparison of Findings From 2006 and 2011 Evaluations
Figure 1-2 provides a comparison of selected findings from the 2006 and 2011 evaluations. Any
comparison between the results from this study and the 2006 Ways to Work Evaluation must be
put into context with economic conditions during the two time periods. The time period
examined in the 2006 evaluation was characterized by a moderate decline in economic
conditions from 2001 and 2002, but then a rapidly expanding economy from 2003 through 2005.
The time period examined in this current evaluation was characterized by a peak in 2007 but a
rapid, widespread deterioration in economic conditions from 2007 to 2010. According to Ways to
Work national office staff, changes in the economy also impacted the populations that sought
loans from Ways to Work. With the tightening of the credit market in the late 2000s, borrowers
with relatively higher incomes and credit scores turned to Ways to Work for affordable car loans
that they could not access elsewhere as they might have done before the recession.




December 2011                                                                                          iv
                                                                          Ways to Work 2011 Evaluation Executive Summary

   Figure 1-2. Comparison of Selected Findings From 2006 and 2011 Ways to Work Evaluations

                 2006 Evaluation Findings
                                                                               2011 Evaluation Findings
   (performed by OMG Center for Collaborative Learning)


                                             Income and Self-Sufficiency

      Almost three-quarters of participants report higher            One-half of employed respondents report higher
      net monthly income.                                            gross monthly income.
      Borrowers average a 41 percent increase in                     Over a third (35 percent) of employed respondents
      income (take-home pay) (average baseline net                   report an increase in income of more than 10
      annual income: $11,904).                                       percent.
      Eighty-seven (87) percent of borrowers continue to             Respondents average an 8.2-percent increase in
      sustain themselves without public cash assistance              wages (average baseline gross annual wages:
      despite receiving it before entering the program.              $21,987) since receiving their Ways to Work loan.
                                                                     Eighty-two (82) percent of survey respondents
                                                                     sustain themselves without Temporary Assistance
                                                                     for Needy Families (TANF) cash assistance
                                                                     despite receiving it before receiving their Ways to
                                                                     Work loan.


                                                      Employment

      Ninety (90) percent of borrowers report their Ways             Ninety-four (94) percent of respondents indicate
      to Work car allowed them to maintain or improve                that their Ways to Work car helped them to
      their employment circumstances.                                maintain or improve their employment
      Fifty-five (55) percent have found more                        circumstances.
      responsibility or higher pay.                                  Forty-four (44) percent of respondents indicate
                                                                     they have received a promotion or pay increase
                                                                     since receiving the Ways to Work loan.


                                                         Education

      Fifty (50) percent of borrowers accessed further               Twenty-six (26) percent of survey respondents
      education or job training thanks to their Ways to              indicate that they have increased their educational
      Work car.                                                      attainment since receiving the Ways to Work loan.


                                         Departure from Predatory Lending/
                                        Use of Mainstream Financial Services
      Two-thirds (about 66 percent) of all borrowers                 Fifty-eight (58) percent of respondents indicate
      have initiated a new account (checking, savings, or            that they have opened a new checking or savings
      credit card) or obtained a new loan since receiving            account, obtained a new credit card, or taken out a
      their Ways to Work loan.                                       new loan since receiving the Ways to Work loan.


                                                   Care of Children

      Nearly all borrowers find that the car enhances                Nearly all respondents indicate that the car helps
      their ability to make sure their children get to               them provide better care for their children and do
      school on time, take the children to medical                   more things for or with their children.
      appointments, and access better childcare
      services.


Source: 2006 Ways to Work National Evaluation, 2011 Ways to Work Borrower Survey




December 2011                                                                                                              v
                                                          Ways to Work 2011 Evaluation Executive Summary

1.2.3. Credit Impact Study
Key findings from the Credit Impact Study regarding non-defaulting borrowers (those who have
completely paid off their Ways to Work loans or who are on target to do so) indicate the
following:

        Recent borrowers may be increasing their credit scores more quickly than borrowers in
        the past. For example, borrowers who initiated loans between December 2008 and
        February 2009 averaged a two-year increase in credit score of 13.3 points, while in
        comparison, borrowers who initiated loans between December 2001 and February 2008
        averaged increases of 6.9 points.

        Program participation contributes to improvements in credit scores. Early groups of
        borrowers have increased their mean credit scores by an average of 31.7 points since
        joining the Ways to Work program. Borrowers who initiated loans between December
        2001 and February 2002 had a mean credit score increase of 30.4; borrowers who
        initiated loans between December 2002 and February 2003 had a mean credit score
        increase of 44.6; and borrowers who initiated loans between December 2003 and
        February 2004 had a mean credit score increase of 23.7.

        When compared with a group of demographically similar individuals, Ways to Work
        borrowers outperform their non-Ways to Work borrower counterparts in terms of
        improving their credit scores. Ways to Work borrowers who initiated loans between
        December 2007 and February 2008 increased their mean credit score by 36 points over
        a four-year period, while a group of similar non-Ways to Work borrowers increased their
        mean credit score by only 25 points during the same time period.

1.2.4. Return on Investment Study
Key findings from the Return on Investment Study indicate the following:

        The projected annual return on investment of the Ways to Work program for all
        stakeholder groups combined is approximately 248 percent, or $2.48 for every $1
        invested.

        Taxpayers benefit from a projected annual savings of approximately $18.2 million from
        reduced enrollment in public assistance of families who participated in the Ways to Work
        program between 2007 and 2010.

        Borrower benefits accruing from increased access to credit is projected to total over $30
        million annually, $13.7 million of which stems from direct access to additional loans.

1.3. Conclusions and Recommendations
Taken together, the findings from these studies demonstrate the degree to which the Ways to
Work program provides borrowers with the tools, knowledge, and opportunities to improve their
economic situations. The Program Outcomes Study indicates that the car and the loan allow
borrowers to improve their employment, educational attainment, and financial management
skills. Qualitative responses from the borrower survey illustrate the deep appreciation borrowers
have for the respect and support shown to them by loan officers at the local sites and how many
of them have used the car as a stepping stone to greater economic security. Results from the

December 2011                                                                                         vi
                                                           Ways to Work 2011 Evaluation Executive Summary

Credit Impact Study demonstrate that Ways to Work borrowers who do not default on their loans
are able to improve their credit scores within a short period of time after receiving the loan and
continue to do so in the years after their loan. The Return on Investment Study concludes that
Ways to Work delivers a significant positive impact for its stakeholders.

During the process of conducting these studies, other questions for further research and
evaluation surfaced. Some of these questions could be answered in the near future by collecting
a few more pieces of data at the local site level, while others would require a more significant
investment. On a programmatic level, as the Ways to Work model becomes a standard for
lending practices for at-risk populations, what changes are needed to the Ways to Work
GreenLight database to increase the capture of evidence to support best practices for the credit-
lending field? In what ways can data from TransUnion be better leveraged to benchmark
program performance and track longitudinal outcomes? Many of the local sites report employing
targeted, innovative solutions to screening applicants, supporting borrowers, and encouraging
on-time loan payments. Which of these solutions are the most effective, and under what
circumstances? On a practice level, both the 2006 and 2011 evaluations found that borrowers
took out new loans after receiving the Ways to Work loan, but little is known about the terms
and sources of these loans. Are borrowers now accessing loans from mainstream lenders with
non-predatory rates? As the children of early Ways to Work borrowers enter adulthood, how are
their economic and educational situations different from those of their parents at that age? What
is the long-term impact of participation in Ways to Work on reducing generational poverty?

The Ways to Work organization and staff continue to demonstrate a commitment to addressing
these and other important questions for the field. The studies reported in this evaluation provide
a starting point for further exploration.




December 2011                                                                                          vii
Program Outcomes Study
                                                              Ways to Work 2011 Program Outcomes Study


2. Program Outcomes Study
2.1. Introduction
In the 2011 Ways to Work Evaluation, the Program Outcomes Study examines the extent to
which the program is having its intended effect and through what activities this effect is
generated. The two primary research questions that this study intends to address are:

    1. What are the short-term individual and family outcomes associated with participation in
       the Ways to Work program? Is there a link between program activities and outcomes for
       borrowers?

    2. In what ways are individuals who participate in the Ways to Work program able to
       achieve a higher degree of economic security (e.g., income covers expenses, saving for
       future goals, ability to withstand unexpected financial crises)?

The data for this study are drawn from two surveys:

        A survey of senior loan coordinators at the Ways to Work local sites

        A survey of recent Ways to Work borrowers

This study describes key aspects of the operation of the Ways to Work Program model,
beginning with a description of the network structure focusing on recent changes to the lending
model, which may influence borrower perspectives regarding program delivery. We then provide
a description of the characteristics of individuals who receive Ways to Work loans, along with
their perceptions gathered from a borrowers’ survey. We then compare the findings from the
current evaluation with findings from the 2006 Ways to Work Evaluation. Finally, we provide a
discussion of trends in service delivery at sites where a higher percentage of survey
respondents have increased their education or income or decreased their use of public
assistance since receiving their Ways to Work loan.

2.1.1. Methods
ICF surveyed senior loan coordinators at local Ways to Work sites about their approach to
delivering the program. We invited all 29 active sites that had made loans during the 2007 to
2010 time period to participate. The survey asked about program staffing, partnerships with
other agencies in the community, time devoted to program activities, and the data management
systems that had recently been implemented across all sites. We conducted the survey online
between July and August 2011 and received a 100-percent response rate.

We sent the borrower survey to 1,530 of the borrowers who received their Ways to Work loans
between January 1, 2007 and December 31, 2010. We chose this start date to avoid overlap
with the 2006 evaluation survey population, and we chose the ending date to ensure that all
borrowers had had their car and loan for at least six months. We included all borrowers for
whom the Ways to Work national office had a mailing address and baseline annual gross
income data during this time period. Borrowers were asked to complete the survey between July
1 and August 5, 2011. A total of 267 surveys were returned undeliverable by the Post Office.
The response rate for deliverable surveys was 35 percent, which is twice the response rate of
the 2006 borrowers’ survey. See Figure 2-1 for borrower survey population figures.


December 2011                                                                                        1
                                                                  Ways to Work 2011 Program Outcomes Study

                              Figure 2-1. Borrower Survey Population Figures

                             Population                             Number
                    Surveys mailed to borrowers                       1,530
                       Undeliverable surveys                           267
                Responses received from borrowers                      445
            Source: 2011 Ways to Work Borrower Survey


The survey queried borrowers about their experiences before and after the Ways to Work loan
on a variety of topics, including income, education, work participation, use of public assistance,
use of mainstream financial services, and financial goals. The survey also explored their
perception of the impact the car purchased with the Ways to Work loan has had on their current
situation and their experience with the program. The borrowers were given an opportunity to
provide additional comments or suggestions for improving the Ways to Work program, excerpts
of which are quoted throughout this report.

In addition, nine borrowers that responded to the survey were interviewed by telephone for 30
minutes in August 2011. They were asked to describe what changes, if any, resulted from
receiving a Ways to Work loan. Specifically, they were asked about their experience buying and
owning a car, how the program may have helped them continue their education, how the
financial education provided by the program may have helped them in any way, and for general
feedback on the program.

Finally, to put both of these streams of data (i.e., loan coordinator and borrower survey data)
into perspective, we conducted community-level research about the economic environment
under which the borrowers and sites were operating.

2.2. Roles of the National Office and Local Sites in Program Delivery
The Ways to Work network consists of a national office in Milwaukee, Wisconsin, and local sites
across the country. The national office supports the local sites in a variety of ways, as explained
in the following section, and seeks to raise the visibility of the Ways to Work program nationally.
The local sites work directly with applicants and borrowers.

2.2.1. Role of the National Office
Since the establishment of Ways to Work, Inc. in 1998 as an independent 501(c)3, the role of
the national office has been to oversee the program’s evolution on a national scale. It performs
this role by selecting and supporting local sites, fund development, and program stewardship.

Ways to Work, Inc. is a member of the nonprofit holding company, Families International, Inc.,
along with United Neighborhood Centers of America, FEI Behavioral Health, and the Alliance for
Children and Families. Ways to Work is most closely aligned with the Alliance for Children and
Families, a membership organization of private nonprofit human service organizations that work
to build strong communities. All Ways to Work local site host agencies are members of the
Alliance for Children and Families. The Ways to Work national office utilizes staff from Families
International in technical areas such as finance, human resources, and information technology
(IT) systems.




December 2011                                                                                            2
                                                                              Ways to Work 2011 Program Outcomes Study

Ways to Work has 11 staff members, organized into teams on 1) business development and
marketing, 2) operations, and 3) funding support services. The focus of these three teams is to
develop and support the local sites. Ways to Work has been developed as a ―program-in-a-box‖
model so that it can be effectively replicated at local host agencies with specific inputs,
expectations, and procedures. To ensure a high level of quality across all the local sites, the
national office supports them by providing ongoing training and consultation on issues such as
program management, staffing, and risk management. The primary fundraising responsibility of
the national office is to secure sufficient loan capital, but it also facilitates pass-through grants of
operational funding support, such as the federal Job Access Reverse Commute (JARC) funds.
The role of the national office in lending and providing IT systems will be discussed in Section
2.2.3, Establishment of Centralized Lending.

2.2.2. Role of the Local Sites
As of August 2011, there were 43 local Ways to Work sites in operation in 22 states. As
mentioned previously, local sites are ―hosted‖ at nonprofits—usually family service
organizations—that are members of the Alliance for Children and Families. The staff that
operate the local Ways to Work program are employees of the host agency, and the degree to
which they work full time on Ways to Work varies, ranging from two staff working a total of 0.6
full-time equivalents (FTE) to five staff working 4.5 FTE. Fundraising to operate a local site,
including the salaries of the program staff, equipment, supplies, and marketing, is handled by
local site program staff, often with the support of the host agency. The local sites are the client-
facing side of Ways to Work; they are the points of contact by which borrowers experience the
program.

ASSESS BORROWER MOTIVATION AT INTAKE

        Sites report that the overall financial status of the applicant and the employment status of the applicant are
        the most important elements in loan committees’ decision whether or not to make a Ways to Work loan.
        Sites report spending the most time on screening and orientation and processing loan application materials
        during the loan application process.


Ways to Work characterizes its mission as ―social-purpose lending.‖ Social-purpose lending
involves making loans at below-market rates for causes that benefit society. Helping low-income
working families buy cars is Ways to Work’s way of benefitting society. Social-purpose lending
seeks to achieve an impact while remaining relatively sustainable. In the case of Ways to Work,
the sustainability comes in part from the 8 percent interest rate that is charged to borrowers.
Ways to Work sees social-purpose lending as an alternative to traditional human services
delivery—not giving low-income families a car, but giving them the opportunity to buy a car.

Ways to Work has developed a screening process for identifying which applicants are ready for
the commitment of receiving a Ways to Work loan and are likely to be able to pay it back, but
because the program works with borrowers with categorically low credit scores, they cannot use
credit scores as a method for screening. Instead they rely on character-based lending, where
loan decisions are made based on demonstrated work history and evidence of personal
initiative. Ways to Work requires that its borrowers be employed for at least six months or be
enrolled in an education or training program. Borrowers must have sufficient cash flow to repay
the loan, as determined when they develop a household budget with their loan coordinator as
part of the application process. Loan coordinators also review applicants’ credit reports with
them, and applicants are asked to develop a personal statement about why they should be

December 2011                                                                                                            3
                                                                      Ways to Work 2011 Program Outcomes Study

chosen for a loan. The loan committee reviews the budget, credit report, and personal
statement, and the committee decides if the applicant will receive a loan and for what amount.
The borrowers’ compliance with all the steps of the application process and ability to meet
deadlines is part of what the loan committee
takes into consideration. Ways to Work believes        “This program gave me an opportunity to provide
this intensive screening process is part of what       adequate transportation for my children to prosper
allows the program to keep its default rate below      and become more well-rounded community
12 percent.                                            members. I lost my job about two weeks after my
                                                             first Ways to Work payment. I struggled to make
                                                             the monthly payments. It was a slow process but I
To understand where in the process loan                      did it, to prove I could be more responsible than in
coordinators are investing their time, local sites           the past and how grateful I was that someone
were asked about the percentage of time they                 trusted me enough to give me another chance.
spend on various aspects of the loan application             Thank you so very much.”
process. On average sites indicate that they
spend the most time on screening and orientation (19 percent) and processing loan application
materials (19 percent). Other aspects include advertising and recruitment (15 percent), helping
the applicant develop a household budget (16 percent), working with the loan committee (11
percent), and processing approved loans (13 percent). These data show where local sites are
spending their time in the loan application process.

Sites were also asked to rate the relative importance of each element of the loan application in
determining whether or not to make a loan, on a scale from 1 (―not very important‖) to 3 (―very
important‖). The two most highly rated elements are the overall financial status of the applicant,
which the sites rate on average 4.4 out of 5 for its importance in the loan decision, and the
employment status of the loan applicant, which the sites rate on average 4.3 out of 5. The
ratings of the other factors are shown in Figure 2-2. This indicates that the loan committees
place a relatively high amount of importance on the borrower’s expected ability to repay the
loan.




December 2011                                                                                                       4
                                                                            Ways to Work 2011 Program Outcomes Study

                  Figure 2-2. Average Rating of Factors in Loan Committee’s Decision




Source: 2011 Ways to Work Local Site Survey

PROVIDE CAR MAINTENANCE COUNSELING

        All but one site indicate that they provide guidelines to borrowers about the kind of car they can purchase
        with their Ways to Work loan (i.e., in terms of age or mileage).
        More than three-quarters of the sites (78 percent) place some restriction on the source from which
        borrowers can purchase their cars; the most common (39 percent) is to require that the car be purchased
        from a car dealer.


The Ways to Work loan is not formally closed until the borrower confirms the selection of a car
and insurance provider. The car serves as collateral on the loan, and a poorly functioning
vehicle may need costly repairs. Local sites provide varying levels of guidance to borrowers in
the process of selecting their cars and various forms of assistance with maintaining their cars.

When asked about the assistance they provide to borrowers in finding a car, 79 percent of sites
indicate that they do help borrowers select a car to purchase. Two-thirds (66 percent) also
indicate that they help borrowers find affordable car insurance and help them to service/repair
the car. The prevalence of other types of services is reflected in Figure 2-3.




December 2011                                                                                                         5
                                                                                             Ways to Work 2011 Program Outcomes Study

                        Figure 2-3. Percent of Sites Offering Assistance With Finding and Maintaining a Car

                       100%
                       90%
                                    79%
                       80%
                       70%                           66%              66%
    Percent of Sites




                       60%
                       50%
                       40%                                                             34%
                       30%
                                                                                                         21%
                       20%
                       10%                                                                                               7%

                        0%
                              Helping to Select     Finding        Helping to   Identifying Useful   Offering Car      Other
                              a Car to Purchase Affordable Car   Service/Repair   Coupons and        Maintenance
                                                  Insurance          the Car        Discounts          Classes
                                                                        Type of Service

Source: 2011 Ways to Work Local Site Survey

Local sites were then queried about the guidance they provide to borrowers about the cars they
buy and where to buy them. All but one site indicate that they provide guidelines to borrowers
about the kind of car they can purchase with their Ways to Work loan (i.e., in terms of age or
mileage). Fifty-seven (57) percent of sites that provide guidelines do so verbally; 43 percent
provide written guidelines.

Local sites were also queried about where borrowers are allowed to go to get an inspection
confirming that the car meets these guidelines. Fifty (50) percent of local sites that provide
guidelines about the cars that can be purchased also require that the inspection be done by a
mechanic/garage on a list of mechanics/garages that they have vetted. Another common
response about guidelines for inspections is that the garage must be listed in the phonebook or
that it must be independent of the seller.

Finally, local sites were asked what, if any, requirements they impose about the sources from
which borrowers can purchase cars. Thirty-nine (39) percent of sites indicate the car must be
purchased from a car dealer, and an additional 18 percent require that it be from a car dealer
they have vetted. Twenty-two (22) percent of sites do not impose any requirements about the
sources from which borrowers can purchase. Other sites provide guidance in the form of
providing a list of recommended dealers, blacklisting dealers they have had problems with in the
past, and prohibiting the purchase of cars from out of state, the Internet, or vehicle auctions.




December 2011                                                                                                                       6
                                                                               Ways to Work 2011 Program Outcomes Study

PROVIDE LOAN PAYMENT COUNSELING AND CASE MANAGEMENT

        37 percent of sites report checking the FIS, Inc. loan tracking platform daily.
        To support borrowers who are not on track for repaying their loans, sites report reviewing their household
        budgets, making referrals to appropriate social services, providing support and counseling, and renegotiating
        payment plans.


As mentioned previously, Ways to Work has a default rate of less than 12 percent nationally. By
comparison, the 2010 average industry default rate for Buy Here, Pay Here car dealers was 30
percent.1 Both lenders work with similar borrowers with distressed credit histories. Ways to
Work believes that the deep case management provided by local sites is the other piece of its
model that encourages such a high repayment rate among its borrowers.

Since 1998, the Ways to Work national office has placed more emphasis on collecting the loan
in its entirety or repossessing vehicles. Early experience with being less strict about repayment
led to abuses of the program and high default rates, according to national office staff, which
threatened the financial sustainability of the program. They believe the repayment rate is
attributable in part to the firm but nurturing accountability process adopted by the local sites.

Local sites are able to access loan payment information from the FIS, Inc. loan tracking
platform, which is updated on a daily basis. When asked how often they check the system for
delinquent borrowers’ information, 48 percent of the 27 responding sites indicate they check it
weekly, 37 percent indicate daily, and 11 percent indicate several times a week. One site
indicates that it checks it rarely.

Local sites were asked what measures they take to ensure loan repayment. Ninety (90) percent
of sites said that they reposess the car when loan payments are not made. To prevent having to
take that drastic measure, though, sites use other tactics. Forty-five (45) percent of sites send
reminders to borrowers are payment due dates, and 55 percent of sites renegotiate loan
repayment terms with borrowers. Other tactics reported include providing incentives to
borrowers to ensure loan repayment, assuming loans from the national office when loan
payments are not made, and keeping in contact with borrowers throughout the month. One site
uses technology to remind delinquent borrowers to get in touch with their loan coordinator: with
the GPS ―On-Time‖ device it installs in cars, local site staff can prevent cars from starting when
the borrower is late making his or her monthly payment and has been avoiding the loan
coordinator’s attempts to contact them.

When asked an open-ended question about what kinds of support they provide to borrowers
who are not on track to repay their loans, the most common responses were reviewing the
borrowers’ household budget (48 percent), making referrals to appropriate social services (38
percent), providing support and counseling (34 percent), and renegotiating the payment plan (28
percent). It is this coaching—financial and emotional—that is at the heart of Ways to Work’s
lending program.

In the survey, local sites were queried as to how they assist borrowers who need additional
supports and services—by providing a program or service directly or referring them to other
1
 National Alliance of Buy Here, Pay Here Dealers. (2010). Buy Here, Pay Here industry benchmarks/trends.
Retrieved from http://www.sgcaccounting.com/Resources/BHPHBenchmarks2010.pdf.


December 2011                                                                                                           7
                                                                           Ways to Work 2011 Program Outcomes Study

providers in the community. Among the 29 sites, the most common supports and services to
offer in-house are financial literacy classes (86 percent), credit repair (62 percent), and family
counseling (54 percent). Supports and services most commonly offered by referral to outside
agencies are helping borrowers access public benefits (83 percent), helping borrowers access
medical services (78 percent), and job training (75 percent). The supports and services least
likely to be available to borrowers through their Ways to Work sites according to the local sites
survey are day care and job retention (see Figure 2-4).

  Figure 2-4. Percent of Sites Offering Additional Supports and Services, Directly and by Referral

       Services                                       Direct Assistance          Referral to Outside Agencies
       Financial literacy classes                           86%                              14%
       Credit repair                                        62%                              34%
       Family counseling                                    54%                              36%
       Life skills (goals, action steps)                    50%                              36%
       Other                                                43%                              29%
       Access to affordable housing                         29%                              64%
       Job search                                           25%                              61%
       Job retention                                        14%                              54%
       Access to public benefits                            10%                              83%
       Job training                                          7%                              75%
       Education (GED/college)                               7%                              71%
       Access to medical services                            4%                              78%
       Day care                                              4%                              61%
      Source: 2011 Ways to Work Local Site Survey

DELIVER FINANCIAL EDUCATION AND CREDIT EDUCATION

        Financial education is most commonly provided to borrowers as formal classes taught by Ways to Work
        or host agency staff, and informally by Ways to Work staff.
        Borrowers receive on average 2 hours of formal financial education class time, and 1.2 hours of informal
        financial counseling.

Financial education is part of the programming that every borrower has to complete, including
developing a household budget in partnership with their loan officer. The financial education
activity has two purposes: 1) to make certain that the borrower has sufficient income to pay
back their loan and 2) to give the borrower budgeting skills and understanding so they can use it
to guide future financial decisions.

Sites deliver financial education in a range of formats and may offer multiple options to
borrowers (see Figure 2-5). Most commonly, sites indicate that financial literacy classes are
provided by Ways to Work or host agency staff (83 percent). Also common is to have the
classes provided by a financial partner (59 percent) or through referral to other agencies (45
percent). Most sites (83 percent) indicate that they augment the classes with financial literacy
provided informally by Ways to Work staff (i.e., as part of the loan interview or through
counseling), but no site lists that as the sole source of financial education available to their
borrowers. Self-study materials (i.e., via workbooks, online, CD-ROM) are also used, though not
as frequently (34 percent), for delivering financial education. Sites indicate that participating in a

December 2011                                                                                                      8
                                                                                       Ways to Work 2011 Program Outcomes Study

financial literacy class—taught by Ways to Work or host agency staff, financial partners, or
referral partners—entails two hours of class time on average, and clients at sites offering
informal financial literacy training receive 1.2 hours of counseling on average.

                                     Figure 2-5. Delivery Method for Financial Literacy Training



                                                                      Other       3%


                                           Materials provided for self-study                     34%
    Delivery Method




                                     Referral to other agencies/institutions                           45%


                                     Classes provided by a financial partner                                 59%


                                 Provided informally by Ways to Work staff                                               83%


                      Classes provided by Ways to Work or host agency staff                                              83%


                                                                               0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
                                                                                                   Percent




Source: 2011 Ways to Work Local Site Survey

When asked what financial education curricula they use, sites indicate that the Federal Deposit
Insurance Corporation’s (FDIC’s) MoneySmart is the most popular curriculum; 28 percent of
sites use it exclusively. Another option available to all local sites for financial education is Ways
to Success, a curriculum developed and co-branded by M&I Bank for Ways to Work. Twenty-
one (21) percent of sites exclusively use the Ways to Success curriculum, and an additional 24
percent use it in combination with FDIC MoneySmart or another curriculum. Seventeen (17)
percent of sites use other curricula made available by financial institutions, while another 10
percent of sites use internally developed curricula. Figure 2-6 presents the frequency of use of
the various curricula.




December 2011                                                                                                                  9
                                                                               Ways to Work 2011 Program Outcomes Study

                Figure 2-6. Financial Education Curricula Used at Ways to Work Local Sites

     Curriculum                                                                                Percent of sites
     FDIC MoneySmart curriculum only                                                                 28%
     Ways to Success curriculum only                                                                 21%
     Ways to Success curriculum supplemented with another curriculum                                 24%
     Financial institution curriculum                                                                17%
     Internally developed curriculum                                                                 10%
    Source: 2011 Ways to Work Local Site Survey


2.2.3. Centralized Lending

        Sites report that centralization lending at the national office has had positive effects on local programs, such
        as being able to make a larger number of loans, as well as negative effects, such as that borrowers can no
        longer make in-person deposits at branches.
        While fewer sites indicate that they receive financial support from their local financial institution partners
        than in 2006 before the establishment of centralized lending, more sites indicate that their financial
        institution partners conduct financial literacy training.


The Ways to Work network underwent a significant change in 2008, when it consolidated all
lending at the national level. Prior to 2008, local financial institutions partnered with each local
Ways to Work site to make loans. Because Ways to Work was responsible for underwriting for
the loans, the local site host agency guaranteed them, meaning the organization kept an
equivalent amount of funds on deposit at the local lending institution. This loan collateral was
itself loaned to the host agencies by the national office and/or from matching federal funding.
This model created close working relationships between the local sites and their financial
institution partners. Financial institution representatives served on the loan committees that
approved borrowers’ applications, taught financial education classes, and cross-sold other
financial products including checking and savings accounts and follow-on loans. According to
the national office, however, this decentralized system made tracking the performance of loans
difficult, and each time a new site opened, the processes had to be recreated.

Ways to Work established a new lending model in 2008 to address the deficiencies of this
decentralized model. Now the Ways to Work national office manages and owns the entire loan
portfolio across all the sites, which means that the national office sets and collects the interest
rate offered to borrowers (8 percent), which subsidizes some of the cost of operations.
Reporting to the credit bureaus about borrowers’ payment histories is now also centralized.
Local sites are still responsible for processing loan applications, making loan decisions with the
support of a loan committee, loan closing, collecting on delinquencies, and holding a default
fund. Local sites have access to loan payment information updated daily through a centralized
loan tracking platform operated by FIS, Inc. on a contract with the national office. This platform
handles titles, payments, statements, and credit bureau reporting and is a commercially
available service. Subsequent to the implementation of centralized lending, the national office
also rolled out GreenLight, an online customer relationship management software, for all local
sites to track interactions with borrowers and loan application information. GreenLight data can
be viewed by the national office and feeds into the FIS loan tracking platform.

In the survey, local sites were asked about the impact of some of these changes to their
operations. One question asked how many sites use other databases or spreadsheet besides

December 2011                                                                                                              10
                                                                   Ways to Work 2011 Program Outcomes Study

GreenLight to store information about Ways to Work borrowers. Eighty-six (86) percent of sites
indicate they do. Among the 27 sites that indicated why they use these other data storage
systems, common reasons were that they are easier to use (33 percent) and they give them
more flexibility to produce the reports they need (37 percent).

When asked about how the implementation of direct lending by the Ways to Work national office
has influenced program activities and outcomes, local sites shared both the positive and
negative effects of the change. Multiple sites indicate that it allows them to make more loans,
but multiple sites also indicate that it is more difficult for borrowers to make payments now than
under the previous system because they cannot make payments in person at the branch, and
that the experience of working with and getting to know a financial institution—for the borrowers
and for the local sites—is missed.

Yet results from the local site survey indicate that
financial institutions still do partner with local Ways     “It was very difficult for me to obtain a loan to buy a
to Work sites. Twenty-three (23) of the 29 sites            car with my poor credit. As a single mom working
surveyed indicate that they partner with one or             full time, I struggle with transportation. I'd like to
more banks, and 18 report partnering with one or            thank Ways to Work and their staff for giving me
more credit unions. Only two sites indicate that            the opportunity to own my first vehicle.”
they do not have any financial institution partners.

According to the national office, one major reason why local banks get involved with Ways to
Work is that doing so earns them credit for their Community Reinvestment Act (CRA)
compliance examinations. The CRA of 1977 established the expectation that commercial banks
would strive to meet the needs of all borrowers in the communities in which they are chartered,
including low- and moderate-income borrowers. Local financial institution partners earn CRA
credit for their financial support of Ways to Work and for their service on loan committees and
teaching financial education to borrowers.

In the survey, the local sites were asked to rate the activity of their financial institution partners
on their site’s loan committee on a scale from 1 (―not active‖) to 3 (―very active‖). Eighty (80)
percent of sites rated their financial institution partners as ―very active‖ on the loan committee,
and sites established before and after 2008 are equally likely to rate their financial institution
partners as such. There was a slight decrease in the percentage of sites that received funding
from their local financial institution partners since the 2006 evaluation: 40 percent of the 41
responding sites in 2006 indicated they received funding from their financial institution partners,
whereas 28 percent of the 29 sites in 2011 indicate the same. There was an increase in the
percentage of sites that indicate that their financial institution partners conduct financial literacy
training for Ways to Work borrowers: 27 percent the 41 responding sites in 2006 indicated their
financial institution partners conduct financial literacy training, whereas 41 percent of the 29
sites in 2011 indicate the same.




December 2011                                                                                                     11
                                                                   Ways to Work 2011 Program Outcomes Study

2.3. What Is the Starting Point for Ways to Work Borrowers?
To understand the influence of the Ways to Work program, it is important to take into
consideration who among the borrowers chose to respond to the survey. Four-hundred forty-five
(445) individuals responded to the 2011 Ways to Work borrower survey. The overwhelming
majority of respondents were female (85 percent).
Forty-eight (48) percent of applicants were African
American, and 31 percent were white; the              A borrower in the Arlington, TX area says Ways to
remaining 21 percent of respondents were of           Work was a “livesaver” for her and her five
another racial group, multi-racial, or chose to not   children. Before getting a car, she could only work
indicate a race. Eight (8) percent of respondents     three hours a day in the evenings because she
                                                      didn’t have transportation to her babysitter, and
identified themselves as Hispanic. The average
                                                      public transportation wasn’t available in her city.
age of borrowers was 35 years old, with the           The car is a “blessing and a necessity” that allows
youngest borrower being 18 years old at the time      her to now work full time and make more money.
of the loan and the oldest borrower being 60 years
old.

Respondents were asked to describe their marital status. Fifty-two (52) percent reported being
single; 22 percent were divorced, separated, or widowed; 13 percent were married; and 3
percent were living with a significant other but not married. The remaining 6 percent of
respondents chose to not indicate their current marital status. Fifty-three (53) percent of these
respondents had fewer than three children living in their household at the time of their loan
application.

Most of the borrowers (86 percent) were in the workforce without a college degree at the time of
their application to the Ways to Work loan program, but many were continuing their education
beyond a high school degree. Twenty-six (26) percent indicated they had attended some
college or university classes, and another 18 percent indicated that they had completed some
vocational school or job training or attained a professional certification at the time of their loan.
Figure 2-7 shows the education attainment level of borrowers.




December 2011                                                                                            12
                                                                              Ways to Work 2011 Program Outcomes Study

                           Figure 2-7. Educational Attainment at Loan Application (n=401)

                100%
                 90%
                 80%
                 70%
      Percent




                 60%
                 50%
                 40%         26%
                 30%                           24%
                                                                   18%                14%
                 20%                                                                                     9%
                 10%
                  0%
                             Some           High school      Some vocational       Associates,       Less than high
                       college/university   degree/GED         school or job       Bachelors,      school or "other"
                            courses                         training, including Masters, PhD, or
                                                               professional     other professional
                                                               certification         degree
                                                          Educational Attainment

Source: 2011 Ways to Work Borrower Survey


All borrowers had been employed for at least six months or were enrolled in an education or
training program when they received their loan. Ways to Work uses these factors as eligibility
criteria to assess the borrowers’ motivation to stay employed or improve their employability. The
average income for survey respondents at the time they received their loans between 2007 and
2010 was $21,592. About three-quarters (71 percent) of survey respondents received some
type of public assistance before they received their loan.

In terms of their use of financial products, seventy-one (71) percent of survey respondents
indicated they had checking accounts and 53 percent had savings accounts at the time they
applied to Ways to Work. Thirty-one (31) percent of survey respondents said they took out one
or more payday loans per year before receiving the Ways to Work loan. The average
VantageScore® credit score among borrowers who received loans between 2007 and 2010 was
571.2

According to administrative data collected by the local sites at intake, the most common sources
of referrals for survey respondents were a social service agency (24 percent), self-referred (24
percent), and a friend (14 percent). Likewise, in the local site survey, loan coordinators told us
that the most common sources of referrals were word-of-mouth from family or friends (an
average of 49 percent) of referrals received across the sites, social service agencies (20
percent), and the sponsoring agency (11 percent).

2.3.1. Economic Impact of the Recent Recession
The period of time covered in the 2011 Program Outcomes Study was a challenging time for
most Americans. During the recession of 2008 to 2010, unemployment rates increased with the
contracting economy, pushing wages down. The target population for the Ways to Work
program was the most likely to be negatively affected by the recession because of its generally
low degree of skill and education. Improvements in economic situation reported in this study
2
    For an explanation of the VantageScore, see Section 3.1.

December 2011                                                                                                          13
                                                                             Ways to Work 2011 Program Outcomes Study

occurred in spite of what has widely been considered the recession worst in U.S. history since
the Great Depression of 1929 to the mid-1930s.

In particular, the results reported in this study are likely to be compared to the 2006 evaluation,
which saw impressive gains in income, employment, and education among respondents to the
borrower survey conducted in mid-2005. The previous study of the Ways to Work program
examined participant employment characteristics during the 2001 to 2005 time period, while this
study examines those characteristics during the 2007 to 2010 time period. In general, the 2001
to 2005 time period was characterized by a moderate decline in economic conditions from 2001
through 2002 due to the global impacts of the terrorist attack of 9/11 but then a rapidly
expanding economy from 2003 through 2005. Much of the decline during the 2001 to 2002 time
period was concentrated in the financial and consumer goods sectors of the economy. The
2007 to 2010 time period was characterized by a peak in 2007 and a widespread rapid
deterioration in conditions beginning in the later months of 2007 and continuing until mid-2010.

Figures 2-8, 2-9, and 2-10 display some major labor market indicators for the 2001 to 2005
period and the 2007 to 2010 period, based on data from the Bureau of Labor Statistics Job
Openings and Labor Turnover Survey and the Bureau’s Current Population Survey. The number
of job openings—a major indicator of the availability of jobs—grew moderately between 2003
and 2005, but after peaking in 2007 it plunged between 2008 and 2010. In total, based on yearly
averages, there were 19,029 job openings during the 2001 to 2005 time period and 13,319
between 2007 and 2010 (see Figure 2-8).

                Figure 2-8. Average Annual Job Openings in the United States, 2001 to 2010

                                  5,000
                                           4,390
                                  4,500
                                  4,000
                   Job Openings




                                  3,500
                                  3,000                                                        2,784

                                  2,500
                                  2,000
                                  1,500
                                  1,000
                                          2001     2003        2005         2007        2009
                                                                   Year

Source: Bureau of Labor Statistics Job Openings and Labor Turnover Survey

Average annual salaries also show a similar trend. In general, salaries increased moderately
between 2002 and 2006 and declined significantly between 2006 and 2010. Between 2001 and
2005, the average annual salary for full-time workers increased by 2.9 percent while, between
2007 and 2010, salaries declined by 4.9 percent (see Figure 2-9).




December 2011                                                                                                      14
                                                                                 Ways to Work 2011 Program Outcomes Study

     Figure 2-9. Average Annual Salary for Full-Time Workers in the United States, 2001 to 2010

                                        $68,000
                                        $67,000
                    Yearly Salary       $66,000
                                        $65,000     $64,299
                                        $64,000                                                 $63,201
                                        $63,000
                                        $62,000
                                        $61,000
                                        $60,000
                                                   2001        2003   2005      2007        2009
                                                                         Year


Source: Bureau of Labor Statistics Current Population Survey


Unemployment rates, as would be expected during a major recession, increased significantly
between 2007 and 2010, from 4.6 percent to 9.6 percent, respectively, which is in contrast to
the 2001 to 2005 time period, when unemployment rates increased moderately post-9/11 to 6.0
percent in 2003 and then dropped to 5.1 percent in 2005.

                Figure 2-10. Average Unemployment Rate in the United States, 2001 to 2010

                                        12.0%
                                                                                                   9.6%
                                        10.0%
                    Unemployment Rate




                                         8.0%

                                         6.0%     4.7%

                                         4.0%

                                         2.0%

                                         0.0%
                                                  2001        2003    2005      2007        2009
                                                                        Year


Source: Bureau of Labor Statistics Current Population Survey




December 2011                                                                                                          15
                                                                            Ways to Work 2011 Program Outcomes Study

2.4. Findings from the Borrower Survey
By connecting borrowers with a car and a loan, Ways to Work provides the tools to build self-
sufficiency. In this section, we explore how the loan and the car affect various aspects of the
borrowers’ loan and car experience: their employment, income, education, financial
management, and the care they provide for their families.

2.4.1. Benefits of the Car
Transportation is one of the biggest barriers low-income individuals face to gaining employment.
According to data from the 2000 census, nearly 65 percent of U.S. households without vehicles
make less than $25,000 per year, indicating that           A borrower in suburban Fort Worth, Texas, knew
low-income people are disproportionately                   she was missing out on new opportunities with her
affected by transportation barriers. As                    company because she didn’t have her own car.
metropolitan suburbs grow, and people and jobs             She found out about the Ways to Work program in
disperse, private transportation is often the              2010, but she wasn’t making enough money in her
easiest and sometimes the only way to get                  current position to pay back the loan. When she
around. Low-income families without a private              told her boss about the program, he offered to give
vehicle are often forced to rely on decentralized          her an on-the-spot increase in her salary so she
public transit systems resulting in cumbersome,            could qualify for the loan. Once she got her Ways
                                                  3        to Work car, this same boss gave her a promotion
unpredictable, and time-consuming commutes.
                                                           to work in a management position at a new branch
Research on the relationship between                       of their store across town, which itself resulted in a
transportation modes and employment suggests               significant pay raise. It would have been
that among low-income workers of a similar skill           impossible for the borrower to get this new position
level, vehicle ownership is a key factor in                without a car.
improving wages and positive employment
characteristics.4 For this reason, offering a loan for car purchase is a highly desirable ―carrot‖ for
Ways to Work to use to attract low-income working families to its program.

INCREASED EMPLOYMENT

        93 percent of survey respondents indicate that the car purchased with the Ways to Work loan was “very
        helpful” for keeping a job.
        86 percent of respondents are currently employed; 77 percent have one job, and 9 percent hold two jobs.
        Respondents report a decrease in days of work missed per month since receiving the Ways to Work loan, from
        an average of 1.6 days before the loan to an average of 0.3 days after the loan.


Low-income, low-skill workers like those who participate in the Ways to Work program often
have trouble finding employment near their homes.5 Owning a car gives them the freedom to
pursue jobs that best meet their skills, interests, and schedules. We asked borrowers about how
a car has affected their ability to find and keep employment. The majority of respondents
indicated that the car was very helpful for sustaining employment.



3
  Blumenberg, E. & Waller, M. (2003). The long journey to work: A federal transportation policy for working families.
   Retrieved from http://www.brookings.edu/reports/2003/07transportation_waller.aspx.
4
  Lichtenwalter, S., Koeske, G., & Sales, E. (2006). Examining transportation and employment outcomes: Evidence
   for moving beyond the bus pass. Journal of Poverty, 10(1), 95-106.
5
  Covington, K. (2009). Spatial mismatch of the poor: An explanation of recent declines in job isolation. Journal of
   Urban Affairs, 31(5), 559–587. 10.1111/j.1467-9906.2009.00455.

December 2011                                                                                                           16
                                                                            Ways to Work 2011 Program Outcomes Study

Borrowers were asked to rate the helpfulness of the car on a scale from 1 (―not at all helpful‖) to
3 (―very helpful‖) or ―not applicable‖ for a variety of activities, including ones related to
employment. When asked about the helpfulness of the car for keeping a job, of the 414
respondents who indicated that the question was applicable, 93 percent responded that the car
was ―very helpful‖ for keeping a job. When asked about the helpfulness of the car for getting a
new job, of the 212 respondents who indicated that the question was applicable, 81 percent
responded that the car was ―very helpful.‖ When asked about the helpfulness of the car for
getting an additional job, of the 146 respondents who indicated that the question was applicable,
72 percent responded that the car was ―very helpful‖ for getting an additional job (see Figure 2-
11). For these borrowers, ―getting a new job‖ could indicate that they secured better
employment than they had when they joined the Ways to Work program because of their
increased mobility or that they were able to replace lost employment. Regardless, from the
perspective of borrowers, the Ways to Work program helped them become and stay employed.

                               Figure 2-11. Car “Very Helpful” for Employment

              100%           93%
              90%
                                                             81%
              80%                                                                             72%
              70%
              60%
    Percent




              50%
              40%
              30%
              20%
              10%
               0%
                      Keep a job (n=414)            Get a new job (n=212)         Get an additional job (n=146)
                                                          Activities
Source: 2011 Ways to Work Borrower Survey

Survey results indicate that 86 percent of borrowers are currently employed. Seventy-seven (77)
percent of respondents have one job, and 9 percent of respondents have two jobs. These
figures represent a decrease from the 100 percent employment at the time of application to the
Ways to Work program. All borrowers must have an income stream to repay their loans.

Ways to Work borrowers are still faring better, employment-wise, than the general working
population. Eighty-five (85) percent of the survey respondents were women, and 48 percent
were African American. As of July 2011, the national employment-population ratio for women
above age 20 was 54.4, meaning 54.4 percent of noninstitutionalized women in the country
were employed.6 Research about the effects of the recession on employment finds that women
have continued to lose jobs during the first two years of the recovery (June 2009 to June 2011),


6
    U.S. Department of Labor, Bureau of Labor Statistics. (2011). Household data Figure A-1: Employment status of
    civilian population by sex and age, September 2011. The Employment Situation, September 2011. Retrieved from
    http://www.bls.gov/news.release/empsit.t01.htm.

December 2011                                                                                                     17
                                                                                   Ways to Work 2011 Program Outcomes Study

whereas men have gained jobs.7 Black women were particularly hard hit, experiencing a rise in
unemployment during the recovery that was seven times greater than their white female peers
(2.1 percent versus 0.3 percent).

Borrowers were queried about the effect having a car has had on their missing days from work
and tardiness. Before the Ways to Work loan, respondents averaged 1.6 days of work missed
per month, while after the loan respondents miss on average 0.3 day per month (see Figure 2-
12). Forty-eight (48) percent of respondents indicate that this reduction was primarily due to the
Ways to Work car. In terms of tardiness, borrowers were asked how many days per month they
arrive a half hour or more late to work or have to leave a half hour or more early from work. The
average decreased from 2.1 days before the loan to 0.8 days after the loan, with 52 percent
saying the reduction was primarily due to the Ways to Work car.

                                             Figure 2-12. Days Missed or Late to Work

                                   2.5
                                                                      2.2
                                   2.0
                  Days Per Month




                                              1.6
                                   1.5

                                   1.0                                       0.8

                                   0.5               0.3                                    Before the loan
                                                                                            After the loan
                                   0.0
                                         Average days of work Average days of work per
                                          missed per month    month arriving or leaving
                                               (n=378)         0.5 hours late or early
                                                                      (n=335)
                                                    Days Missed or Tardy

Source: 2011 Ways to Work Borrower Survey

ACCESS TO EDUCATION

          82 percent of survey respondents indicate that the car purchased with the Ways to Work loan was “very
          helpful” for completing an education or job training program.
          26 percent of survey respondents indicate that they have increased their educational attainment since
          receiving the loan.




7
    National Women’s Law Center. (2011). Employment crisis worsens for black women during the recovery. Retrieved
    from http://www.nwlc.org/resource/employment-crisis-worsens-black-women-during-recovery.

December 2011                                                                                                            18
                                                                           Ways to Work 2011 Program Outcomes Study

Having stable employment goes a long way to ensuring economic stability for participating
households. Many of the Ways to Work borrowers are in low-skilled, low-paying jobs, however,
that do not offer opportunity for advancement. An expected result of the Ways to Work program
is that having a car will allow borrowers to continue their education and training, leading to a
well-defined career pathway with opportunity
for advancement.                                        One borrower told us how the car purchased with
                                                                the Ways to Work loan has benefitted her entire
Borrowers were asked to rate the helpfulness          family. The car helps the borrower get to work
of the car for continuing their education on the      earlier and has helped her husband attend school
same 1 to 3 scale as was used for the                 where he is studying for a business management
employment questions. When asked about the            degree. “There are places that will help people
helpfulness of the car for starting or staying in     who do not have good credit and they’re trying to
                                                      start over…you just have to look around. I looked
an education or job training program, of the 202
                                                      around and I found Ways to Work.”
respondents who indicated that the question
was applicable, 84 percent responded that the
car was ―very helpful.‖ When asked about the helpfulness of the car for completing an education
or job training program, of the 171 respondents who indicated that the question was applicable,
82 percent responded that the car was ―very helpful.‖

As Figure 2-13 illustrates, one way that the Ways to Work car assists borrowers with continuing
education and training is it decreases the amount of time they spend commuting to work.
Decreasing commuting time frees up time to pursue other activities including education and
training. When asked about the helpfulness of the car for decreasing commuting time, of the
349 respondents who indicated that the question was applicable, 87 percent responded that the
car was ―very helpful.‖

               Figure 2-13. Car “Very Helpful” for Education and Decreasing Commuting Time
             100%               87%
              90%                                              84%                               82%
              80%
              70%
              60%
   Percent




              50%
              40%
              30%
              20%
              10%
               0%
                    Decrease amount of time spent Start (or stay in) an education Complete an education or job
                     commuting (to work or to an or job training program (n=202)    training program (n=171)
                       education or job training
                          program) (n=349)
                                                            Activities

Source: 2011 Ways to Work Borrower Survey

According to the survey, about 26 percent of respondents (n=383) indicate that they have
increased their educational attainment since receiving the loan. The most common transition
was going from a high school degree to completing some college courses.


December 2011                                                                                                     19
                                                                               Ways to Work 2011 Program Outcomes Study

INCREASED INCOME

          For survey respondents who are employed, the average increase in gross annual wages since enrollment
          in the Ways to Work program is 8.2 percent.
          47 percent of employed respondents have increased their income since enrollment. Thirty-five (35)
          percent of them have increased their income by more than 10 percent.
          22 percent of respondents report having received a monthly pay increase of more than $100, and an
          additional 17 percent have received a monthly pay increase of $1 to $99.


It is expected that helping borrowers increase their educational attainment and access better
jobs will lead to increased income. To understand if having reliable transportation leads to
increased income for borrowers, the survey queried borrowers, ―How much was your most
recent paycheck (before taxes, health insurances, retirement savings, etc.)?‖ and ―How often
are you paid?‖ The combination of these two pieces of data should provide the borrower’s gross
wages, which can be compared to the gross wages reported at the time of their application to
the Ways to Work program. Of the 377 respondents who gave us this information about their
pay, 318 report currently earning income. The average current annual gross income from wages
for these 318 respondents is $21,961.15, ranging from a high of $73,164.00 to a low of
$1,668.00. The average change in gross annual wages since enrollment in the Ways to Work
program for these borrowers is an increase of 8.2 percent.

Examining averages obscures the significant increases in income made by some borrowers,
however. From these same baseline and current gross annual wages from income figures, we
determine that 47 percent of the 318 respondents have increased their income from the time
they took out the Ways to Work loan to when they were surveyed. Thirty-five (35) percent of
them increased their income by more than 10 percent.

By comparison, the 2006 Ways to Work Evaluation found that 72 percent of the 223
respondents with full data available increased their net monthly income from the time they took
out the Ways to Work loan to when they were surveyed. The respondents in the 2006 study had
a baseline average net annual income of $11,904 while the respondents in the 2011 study had
baseline average gross annual wages of $21,987, however. This comparison is shown in Figure
2-14.

                  Figure 2-14. Increases in Income, 2006 Evaluation and 2011 Evaluation
                                                         Average
                                    Number of                                  Percent         Average Income
             Evaluation Year                             Baseline
                                   Respondents                  8             Increase            at Survey
                                                         Income
                   2006                 223              $11,904                41%               $16,785
                   2011                 318               $21,987               8.2%              $23,790
            Source: 2006 Ways to Work National Evaluation, 2011 Ways to Work Borrower Survey

Also contributing to the slower growth of wages for the two sets of survey respondents were the
different labor market conditions during each group’s loan term, as explained in Section 2.3.1.
With the U.S. economy expanding between 2002 and 2006, annual salaries for all full-time
workers were on an upward trend. Starting just before the recent recession and coinciding with

8
    The 2006 evaluation queried borrowers about their net wages, while the 2011 evaluation queried borrowers about
     their gross wages.

December 2011                                                                                                        20
                                                                             Ways to Work 2011 Program Outcomes Study

the beginning of the time period examined in the 2011 study, however, average annual salaries
declined significantly. Between 2001 and 2005, the average annual salary for full-time workers
increased by 2.9 percent, while between 2007 and 2010 salaries declined by 4.9 percent,
according to the Bureau of Labor Statistics Current Population Survey (see Figure 2-9).
Another way to compare results reported in the 2006 evaluation with results reported in the
2011 evaluation is to compare any increase in income among respondents who started with
commensurate wages at the time of program enrollment. Thirteen (13) employed respondents
to the 2011 evaluation survey began the program with annual gross wages between $11,000
and $12,000. Their average annual gross wages at the time of the survey was $18,573, an
average increase of 61 percent. Only two of these 13 experienced a decline in wages.

Taken together, these results indicate three points about the change in wages associated with
the Ways to Work program:

       1. The program is approving loans for borrowers with a higher income at the time of
          application. This fact may be a response to the loan committees’ emphasis on borrowers
          having sufficient income to pay back the loan in full. It may also reflect the impact that
          the recession has had on individuals’ credit scores.

       2. The differing rates of increased incomes between 2006 and 2011 have to be taken in the
          context of the prevailing economic conditions. Forty-seven (47) percent of employed
          respondents in 2011 increased their income since receiving the Ways to Work loan at a
          time when wages nationally fell by 4.9 percent. Seventy-two (72) percent of respondents
          in 2006 increased their income since receiving the Ways to Work loan at a time when
          wages nationally rose by 2.9 percent.9

       3. More recent borrowers with baseline incomes commensurate to the average baseline
          income among respondents to the 2006 evaluation survey ($11,000 to $12,000) appear
          to have made equally strong—if not stronger—gains in pay, despite the economic
          downturn.

Borrowers surveyed in 2011 were also asked a slightly different question about wages: if they
had received a pay increase or promotion at any point in time since participating in the Ways to
Work program. Twenty-two (22) percent of 417 respondents to this question report having
received a monthly pay increase of greater than $100, and an additional 17 percent of
respondents have received a monthly pay increase of $1 to $99. See Figure 2-15 for a count of
borrowers who received a promotion or pay increases of each amount.




9
    Bureau of Labor Statistics Current Population Survey. http://www.bls.gov/cps/

December 2011                                                                                                      21
                                                                                                  Ways to Work 2011 Program Outcomes Study

                                   Figure 2-15. Respondents Who Received Promotions or Pay Increases (n=183)
                              80
                                           71
                              70
      Number of Respondents




                              60
                              50                                47

                              40
                              30                                                                          24
                                                                                     21                                        20
                              20
                              10
                               0
                                     Pay increase $1-   Pay increase $100- Pay increase $250- Pay increase $500+ Promotion but not
                                           $99                 $249               $499                              pay increase
                                                                     Amount of Monthly Pay Increase

Source: 2011 Ways to Work Borrower Survey

The 2011 survey also asked borrowers about their use of payday loans. Their responses
provide insight on the degree to which borrowers are able to cover their expenses with their
incomes. Among the 360 respondents who responded about their use of payday loans, use
decreased from 1.3 payday loans per year before receiving the Ways to Work loan to 0.5
payday loans per year after receiving the Ways to Work loan.

USE OF PUBLIC ASSISTANCE

                              Survey responses indicate a 20-percent net decrease in receipt of TANF cash assistance.
                              Survey responses indicate a 19-percent net decrease in receipt of WIC.
                              Survey responses indicate a 4-percent net increase in receipt of SNAP benefits, but this is a much smaller
                              increase than the 64 percent increase in receipt by households nationwide during the same time period.


Participation in the Ways to Work program is associated with a decrease in use of many forms
of public assistance. As Figure 2-16 illustrates, there was a 20-percent net decrease in receipt
of TANF cash assistance (the monthly cash benefit), a 19-percent net decrease in the receipt of
WIC (the Special Supplemental Nutrition Program for Women, Infants and Children), and a 7-
percent net decrease in use of LIHEAP (the Low Income Home Energy Assistance Program).
There were net increases in the use of other public assistance programs, though most of them
were smaller: a 10-percent increase in the use of the School Breakfast and Lunch program and
a 7 percent increase in use of Medicaid services. While there was a net increase in the use of
SNAP benefits (Supplemental Nutrition Assistance Program, or food stamps) of 4 percent, it
was dramatically lower than the nationwide increase in use of SNAP during roughly the same
time period: between July 2008 and July 2011, use of SNAP benefits by households nationwide
increased by 64 percent.10


10
     U.S. Department of Agriculture, Food and Nutrition Service. (2011). Supplemental nutrition assistance program:
     Data as of September 29, 2011. Retrieved from http://www.fns.usda.gov/pd/34SNAPmonthly.htm.

December 2011                                                                                                                              22
                                                                          Ways to Work 2011 Program Outcomes Study

                Figure 2-16. Use of Public Assistance Before and After Ways to Work Loan


                                                                          Did Not
                                              Received
                                                                          Receive
                                             Assistance
                                                                        Assistance                    Net
                                               Before
           Form of Public Assistance                      % Leavers       Before      % Starters    Change in
                                             Loan, But
                                                                        Loan, But                     Use
                                              Not Now
                                                                          Do Now
                                             (Leavers)
                                                                         (Starters)


     TANF - Cash assistance (n=391)               96         25%            18            5%          -20%
     WIC (n=381)                                 123         32%            51           13%          -19%
     TANF - Supportive services (n=378)           65         17%            26            7%          -10%
     Head Start (n=385)                           68         18%            30            8%          -10%
     TANF - Diversion (n=369)                     33          9%             2            1%           -8%
     LIHEAP (n=398)                               90         23%            63           16%           -7%
     Earned Income Tax Credit (EITC)
                                                 93          24%            82           21%           -3%
     (n=389)
     Child Welfare Services (n=370)              18           5%             6            2%           -3%
     Housing Assistance (n=391)                  66          17%            59           15%           -2%
     State Children’s Health Insurance
                                                 41          11%            41           11%           0%
     Program (SCHIP) (n=377)
     Supplemental Security Income (SSI)
                                                 21           6%            30           8%            2%
     (n=373)
     SNAP (n=418)                                109         26%           127           30%           4%
     Medicaid (n=402)                             84         21%           112           28%           7%
     School Breakfast and Lunch (n=395)          77          19%           113           29%           10%
     Source: 2011 Ways to Work Borrower Survey

IMPROVED QUALITY OF LIFE

        95 percent of survey respondents indicate that the car purchased with the Ways to Work loan was “very
        helpful” for taking children to school, appointments, and other activities.
        93 percent of survey respondents indicate that the car purchased with the Ways to Work loan was “very
        helpful” for improving quality of life overall.


In addition to the economic benefits of participating in the Ways to Work program, survey
respondents also indicated that the program has had a positive impact on their family and
personal lives. Reducing the time borrowers spend commuting frees time for family involvement.
In addition to its uses for education and employment purposes, borrowers can also use the car
to provide better care for their children.

Borrowers were asked to rate the helpfulness of the Ways to Work car for caring for their
children, spending time with family and friends, and improving their quality of life overall on the
same 1 to 3 scale used for employment and education. When asked about the helpfulness of
the car for spending more time with family and friends, of the 406 respondents who indicated
that the question was applicable, 90 percent respond that the car was ―very helpful.‖ When
asked about the helpfulness of the car for improving their quality of life overall, of the 435
respondents who indicated that the question was applicable, 93 percent respond that the car

December 2011                                                                                                   23
                                                                          Ways to Work 2011 Program Outcomes Study

was ―very helpful.‖ When asked about the helpfulness of the car for taking children to school,
appointments, or other activities, of the 425 respondents who indicated that the question was
applicable, 95 percent respond that the car was ―very helpful.‖ When asked about the
helpfulness of the car for doing more things for or with their children, of the 426 respondents
who indicated that the question was applicable, 95 percent respond that the car was ―very
helpful‖ (see Figure 2-17).

                          Figure 2-17. Car “Very Helpful” for Improving Quality of Life

             100%
             98%
             96%             95%                    95%
             94%                                                           93%
   Percent




             92%                                                                                  90%
             90%
             88%
             86%
             84%
                    Take children to school, Do more things for or Improve your quality of Spend more time with
                      appointments, and      with children (n=426)   life overall (n=435)    family and friends
                    other activities (n=425)                                                      (n=406)
                                                             Activities

Source: 2011 Ways to Work Borrower Survey

The survey also asked borrowers about the amount of time they spend doing volunteer work.
Among the 363 respondents who responded to this question, volunteering increased from 2.6
hours per month on average before receiving the Ways to Work loan to 5.2 hours per month on
average after receiving the Ways to Work loan.

2.4.2. Benefits of Loan
While the car is the more tangible benefit
provided to Ways to Work borrowers, the loan          “I am so grateful for the Ways to Work program!
itself also helps borrowers improve their             Because of this program, it's been so much easier
financial situation. Because Ways to Work             getting to work, bringing my children to school and
                                                      bringing my youngest son to daycare. Also, since
reports loan repayment directly to two of the
                                                      not having a large monthly car payment I'm able to
three credit bureaus (TransUnion and                  pay down my student loans – which were sliding
Experian), making on-time payments builds a           into default. Thank you!”
positive credit history and can increase
borrowers’ credit scores. Increased credit scores allow borrowers to access traditional financial
markets and invest in additional assets. Ways to Work prepares borrowers to successfully pay
back their loans by teaching them better financial management skills.




December 2011                                                                                                     24
                                                                              Ways to Work 2011 Program Outcomes Study

INCREASED FINANCIAL LITERACY

        90 percent of survey respondents indicate that the Ways to Work program helped them improve their
        financial situation.
        53 percent of survey respondents indicate they are currently saving for a rainy day/emergencies.
        61 percent of respondents indicate that they have pulled their credit report in the past year.


Borrowers were asked to what extent the Ways to Work program helped them ―understand their
financial situation (for example, their household spending patterns or the impact of their credit
score)‖ and to what extent it helped them ―improve their financial situation (for example, stick to
a budget or raise their credit score).‖ Ninety (90) percent of respondents express that the
program helped them in each of these ways (see Figure 2-18).

    Figure 2-18. Extent to Which Ways to Work Helped Borrowers With Their Financial Situation

  100%
    90%
    80%
    70%
                     57%                                           56%
    60%
                                                                                                                 Very much
    50%
                                                                                                                 Somewhat
    40%                        33%                                           34%
                                                                                                                 Not much
    30%
    20%
                                         10%                                             10%
    10%
     0%
            Understand Financial Situation (n=435)          Improve Financial Situation (n=434)


Source: 2011 Ways to Work Borrower Survey

Borrowers were also asked to rate the
helpfulness of the financial education in                           One borrower says she uses what she learned
providing them with information and skills in six                   from Ways to Work to help her save money for
specific areas of financial management, on a                        emergencies, for retirement, and maybe even to
scale from 1 (―not at all helpful‖) to 3 (―very                     start her own small business. She now teaches her
                                                                    son how to budget and save for things he wants by
helpful‖). Of the 305 who answered regarding
                                                                    giving him a modest allowance. In general, she
the helpfulness of the financial education for                      says, “I pay more attention to what’s going on
paying back their loan, 68 percent indicated that                   financially, and at the bank. Before I wouldn’t really
the education was ―very helpful.‖ Of the 302 who                    pay attention because I didn’t have any money and
answered regarding the helpfulness of the                           I didn’t want to deal with bills. But now I’ve built my
financial education for creating a budget, 65                       credit back up and I’m more on top of
percent indicated that it was ―very helpful.‖ The                   everything…I feel more stable.”
rest of the responses are represented in Figure
2-19.

December 2011                                                                                                                 25
                                                                                     Ways to Work 2011 Program Outcomes Study

                 Figure 2-19. Financial Education “Very Helpful” for Financial Management Activities
                 100%
                   90%
                   80%
                               68%              65%
                   70%                                          61%                61%           60%
                   60%                                                                                            55%
       Percent




                   50%
                   40%
                   30%
                   20%
                   10%
                    0%
                           Paying back  Creating a    Reading a Avoiding future Managing your Using banking
                            your loan budget (n=302) credit report debt (n=304) money (n=308)    services
                             (n=305)                   (n=303)                                   (n=298)
                                                                      Activities

Source: 2011 Ways to Work Borrower Survey

Borrowers’ responses to a series of questions about their financial habits also indicate that they
are practicing the behaviors encouraged in basic financial literacy classes. Fifty-three (53)
percent of respondents (n=300) indicate they are currently saving for a rainy day/emergencies.
Additionally, 61 percent of respondents (n=299) indicate that they have pulled their credit report
in the past year.11

INCREASED ACCESS TO TRADITIONAL FINANCIAL MARKETS

                 Among the survey respondents who did not have a checking account at the time they received their Ways
                 to Work loan, 50 percent have since opened them.
                 Among the survey respondents who indicate that they are actively saving for a goal and specified where
                 they deposit those savings, 64 percent are saving in an account at a mainstream financial institution (a
                 bank or credit union).
                 24 percent of survey respondents indicate that they have taken out a new loan since receiving the Ways
                 to Work loan.

The Ways to Work program appears to get borrowers more engaged with mainstream financial
services. Of the 114 survey respondents who did not have a checking account at the time of the
Ways to Work loan, 50 percent have opened a checking account since receiving the loan. Of
the 194 respondents who did not have a savings account at the time of the Ways to Work loan,
35 percent have opened a savings account since receiving the loan. Of the 273 respondents
who indicate that they are actively saving for a goal and specified where they deposit those


11
     It is possible that some survey respondents might have reported their Ways to Work application as the last time
     they pulled their credit report. Among the 299 responses to this question, the date given for the last time the
     borrower had pulled their credit report coincided with the month of their loan start date in only 5 cases.

December 2011                                                                                                               26
                                                                            Ways to Work 2011 Program Outcomes Study

savings, 64 percent are saving in a bank or credit union account, and 21 percent are saving in
an employer-sponsored retirement plan.

Borrowers were also queried about if they have          “Since I have paid off my Ways to Work loan, I was
taken out another loan since the Ways to Work           able to purchase a 2010 Dodge without a cosigner.
loan. Twenty-four (24) percent of respondents said      I understand my credit and have been working to
they had. Among those who told us what the new          better it. Thank you! This is a great program and I
                                                        recommend it to everyone.”
loan was for, the two most popular reasons were
purchasing another car (42 percent) and going to
school (21 percent). Ten (10) percent indicate they have taken out a loan to buy a house.
Respondents may have given more than one reason for taking out loans.

The 2006 Ways to Work National Evaluation found that two-thirds (67 percent) of all borrowers
initiated a new account (checking, savings, credit card) or obtained a new loan since receiving
their Ways to Work car purchase loan. In the 2011 survey, a slightly smaller percentage (58
percent) of respondents indicate that they have opened a new checking or savings account,
obtained a new credit card, or taken out a new loan since receiving the Ways to Work loan.

LOAN REPAYMENT

        A higher proportion of survey respondents with car purchase loans of greater than $4,000 are still driving
        their cars, compared with respondents with loans of smaller amounts.


Among the 445 survey respondents, most borrowers (91 percent) received loans for car
purchases, with a small number made for car repairs or other purposes. Most car purchase
borrowers (95 percent) received loans with loan periods of 24 to 30 months. None were longer
than 30 months.

Among survey respondents who received loans for a car purchase, 31 percent received loans
for less than $3,000; 20 percent received loans for $3,000 to $3,999; 37 percent received loans
for $4,000; and the remaining 12 percent received loans for more than $4,000. Three-hundred
and nine (309) people indicated they are still driving the car they bought through the Ways to
Work program, representing 70 percent of survey respondents. As seen in Figure 2-20, a higher
proportion (90 percent) of respondents with car purchase loans of greater than $4,000 are still
driving their cars than respondents with loans of smaller amounts. In addition to reinforcing the
presumption that investing a larger amount of money in a car increases its reliability, this finding
could also be related to the relative age of the cars; Ways to Work began offering loans of
above $4,000 in April 2009.




December 2011                                                                                                        27
                                                                              Ways to Work 2011 Program Outcomes Study



     Figure 2-20. Respondents Still Driving their Ways to Work Car, by Car Purchase Loan Amount

                           100%
                                                                                 90%
                           90%    86%                            84%
                                                77%
                           80%
  Percent of Respondents




                           70%
                                                                                                        Still Driving
                           60%                                                                          Vehicle
                           50%
                                                                                                        Not Still
                           40%                                                                          Driving
                           30%                        23%                                               Vehicle
                                                                       16%
                           20%          14%
                                                                                       10%
                           10%
                            0%
                                  <$3,000     $3,000-$3,999        $4,000         >$4,000
                                   (n=97)         (n=66)          (n=134)          (n=41)
                                               Loan Amount for Car Purchase

Source: GreenLight data, 2011 Ways to Work Borrower Survey

2.4.3. Comparison of Findings From 2006 and 2011 Evaluations
Figure 2-21 provides a comparison of selected findings from the 2006 and 2011 evaluations.
The differences in results may reflect both changes in the program and also changes in larger
economic conditions. The economic conditions that should be taken into consideration when
comparing findings from these two time periods—changes in the levels of annual job openings,
average annual salaries, and the unemployment rate—have been explored thoroughly in
Section 2.3.1 and throughout the study.




December 2011                                                                                                           28
                                                                               Ways to Work 2011 Program Outcomes Study

     Figure 2-21. Comparison of Selected Findings From 2006 and 2011 Ways to Work Evaluations

                 2006 Evaluation Findings
                                                                                   2011 Evaluation Findings
     (performed by OMG Center for Collaborative Learning)

                                              Income and Self-Sufficiency

      Almost three-quarters of participants report higher            One half of employed respondents report higher
      net monthly income.                                            gross monthly income.
      Borrowers average a 41-percent increase in                     Over a third (35 percent) of employed respondents
      income (take-home pay) (average baseline net                   report an increase in income of more than 10
      annual income: $11,904).                                       percent.
      Eighty-seven (87) percent of borrowers continue to             Respondents average an 8.2-percent increase in
      sustain themselves without public cash assistance              wages (average baseline gross annual wages:
      despite receiving it before entering the program.              $21,987) since receiving their Ways to Work loan.
                                                                     Eighty-two (82) percent of survey respondents
                                                                     sustain themselves without TANF cash assistance
                                                                     despite receiving it before receiving their Ways to
                                                                     Work loan.


                                                       Employment

      Ninety (90) percent of borrowers report their Ways             Ninety-four (94) percent of respondents indicate
      to Work car allowed them to maintain or improve                that their Ways to Work car helped them to
      their employment circumstances.                                maintain or improve their employment
      Fifty-five (55) percent have found more                        circumstances.
      responsibility or higher pay.                                  Forty-four (44) percent of respondents indicate
                                                                     they have received a promotion or pay increase
                                                                     since receiving the Ways to Work loan.


                                                         Education

      Fifty (50) percent of borrowers accessed further               Twenty-six (26) percent of survey respondents
      education or job training thanks to their Ways to              indicate that they have increased their educational
      Work car.                                                      attainment since receiving the Ways to Work loan.


                                         Departure from Predatory Lending/
                                        Use of Mainstream Financial Services
      Two-thirds (or roughly 66 percent) of all borrowers            Fifty-eight (58) percent of respondents indicate
      have initiated a new account (checking, savings, or            that they have opened a new checking or savings
      credit card) or obtained a new loan since receiving            account, obtained a new credit card, or taken out a
      their Ways to Work loan.                                       new loan since receiving the Ways to Work loan.


                                                     Care of Children

      Nearly all borrowers find that the car enhances                Nearly all respondents indicate that the car helps
      their ability to make sure their children get to               them provide better care for their children and do
      school on time, take them to medical                           more things for or with their children.
      appointments, and access better child care
      services.

Source: 2006 Ways to Work National Evaluation, 2011 Ways to Work Borrower Survey




December 2011                                                                                                              29
                                                                             Ways to Work 2011 Program Outcomes Study

2.5. What Local Site Activities Produce Successful Participants?
        The site-level borrower default rate during the study period was significantly lower for the “successful
        sites” than for other responding sites: 3.7 percent compared to 7.9 percent, respectively.
        Successful sites spent more time on average helping borrowers apply for loans and providing and/or
        referring them to social services and less time on monitoring non-delinquent loans and counseling
        delinquent borrowers, compared to the other sites.


To understand how local Ways to Work sites can most effectively coach their borrowers to
achieve success, we looked for trends in activities and services among those sites that
produced a higher proportion of successful participants. For this analysis, we defined successful
participants as those who, since joining the Ways to Work program, have achieved one or more
of the following:

        Increased their salary by at least 10 percent
        Stopped receiving public assistance
        Increased their educational attainment

Among the survey respondents, 231 borrowers meet at least one of these criteria, or roughly 51
percent of the total respondents. We then calculated the percentage of each sites’ respondents
who fell in this successful participant classification and the number of respondents necessary to
be considered statistically significant at each site. Four of the 29 sites were classified as being
both successful and containing enough respondents to be considered statistically significant.
Successful sites are defined as sites that have an average success rate for borrowers that is at
least two percentage points higher than the average success rate across all sites combined (51
percent) and that have at least 19 respondents.

The other sites should not be viewed as being unsuccessful; the four identified were simply
more successful than the average. Several other sites had success rates well above the
average but are not included in the analysis of successful sites because they had too few
respondents to achieve a reasonable level of confidence.

Figure 2-22 indicates the number of successful participant survey respondents, total number of
responding borrowers, and the resulting percentage of successful participants for the four
successful sites. Three had success rates significantly above the average for all sites, including
Local Site A and Local Site C with 62 percent success rates and Local Site B at 63 percent. The
final site, Local Site D, had a success rate that was three percentage points above the average,
54 percent, but had the greatest number of successful participants among all sites, with 30.




December 2011                                                                                                      30
                                                                              Ways to Work 2011 Program Outcomes Study

                                           Figure 2-22. Successful Sites

                                                   Number of
                                                                   Total Number
                                                   Responding                             Percent
                          Organization                             of Responding
                                                   Successful                            Successful
                                                                     Borrowers
                                                   Participants

                 Local Site A                           21               34                 62%
                 Local Site B                           12               19                 63%
                 Local Site C                           16               26                 62%
                 Local Site D                           30               56                 54%
                 Source: 2011 Ways to Work Local Site Survey, 2011 Way to Work Borrower Survey


One trend that is clearly evident is the difference in the borrower default rate between
successful sites and the other sites. The site-level borrower default rate for the entire study
period (2007 to 2010) was significantly lower for the successful sites than for other responding
sites, 3.7 percent compared to 7.9 percent, respectively. The majority of the respondents from
these successful sites now earn more money since receiving the loan and/or have increased
educational levels, which can also lead to increased earnings. An increase in earnings is likely
to increase a borrower’s ability to successfully pay off the loan and avoid default. A decrease in
dependence on public assistance, the third dependent variable of a successful site, can also
signify an increase in earnings. In fact, the borrower survey reveals that successful borrowers
have experienced an increase in average income of 50 percent between the time they applied
for the loan and the time of the survey, as shown in Figure 2-23, compared to a decrease in
income of about 22 percent for other borrowers over the same time period.

     Figure 2-23. Change in Average Income of Successful Participants and Other Participants



                                                       Successful Participants       Other Participants
                                                             (n=110)                     (n=130)
                Average income after program                 $28,290                     $18,549
                Average income before program                  $18,914                    $23,770
                Source: 2011 Way to Work Borrower Survey


We analyzed and compared the activities of successful sites to those of the other sites to
identify correlations and trends. Figure 2-24 shows the average percent of time that sites spent
on specific activities during borrowers’ loan process and after borrowers purchased their cars.
Successful sites spent more time, on average, helping borrowers apply for loans and providing
and/or referring them to social services in comparison to the other sites. Less time was spent by
successful sites on monitoring non-delinquent loans and counseling delinquent borrowers as
compared to the other sites.




December 2011                                                                                                       31
                                                                 Ways to Work 2011 Program Outcomes Study

                       Figure 2-24. Average Percent of Time Spent on Each Activity




Source: 2011 Ways to Work Local Site Survey



In regard to the time spent on loan application activities, there was less of a variance between
the successful sites and other sites. As shown in Figure 2-25, slightly more time on average was
spent by successful sites on screening and orientation, helping develop a household budget,
and working with the loan committee. Less time was spent by successful sites on processing
approved loans than at the other sites.




December 2011                                                                                          32
                                                                              Ways to Work 2011 Program Outcomes Study

                       Figure 2-25. Average Percent of Time Spent on Each Loan Application Activity
                     25%
                                         21%
                     20%                       19%                19%19%
                                                      17%
                                                         16%
   Percent of Time




                            15%15%
                     15%                                                                      14%
                                                                                           13%
                                                                              10%
                     10%                                                            8%
                                                                                                           Successful sites
                     5%                                                                                    Other sites


                     0%
                           Advertising Screening      Helping    Processing Working with Processing
                               and         and       Develop a      Loan       Loan      Approved
                           Recruitment Orientation   Household   Application Committee     Loans
                                                      Budget      Materials

                                                            Activity

Source: 2011 Ways to Work Local Site Survey

All Ways to Work sites provide assistance on various issues to borrowers either directly or by
referring the borrower to local agencies. These assistance services include access to medical
services and affordable housing, life skills, family counseling, day care, job search, and financial
literacy classes. This assistance can be of great benefit to producing successful participants.
Job training and job search services, for example, can help borrowers obtain jobs that match
their skill sets, and financial literacy training can give them the skills to budget their household
finances, which can lead to greater savings and better financial management. Figure 2-26
shows the percentage of sites that provide direct assistance in each of these activities. The
results are broken out by successful sites and other sites to identify trends between the two. A
greater percentage of successful sites provide assistance in life skills, day care, and financial
literacy directly. All successful sites provide financial literacy classes directly, and 75 percent of
successful sites provide coaching on life skills directly, while 84 percent and 44 percent of other
sites provided direct assistance in these services, respectively.




December 2011                                                                                                       33
                                                                                Ways to Work 2011 Program Outcomes Study

                   Figure 2-26. Percent of Sites Providing Services by Direct Assistance

                                                        Successful Sites                     Other Sites
        Financial literacy classes                           100%                               84%
        Life skills (goals, action steps)                     75%                               44%
        Credit repair                                         25%                               68%
        Family counseling                                     25%                               56%
        Day care                                              25%                                0%
        Access to affordable housing                          0%                                32%
        Job search                                            0%                                28%
        Job retention                                         0%                                16%
        Access to public benefits                             0%                                12%
        Education (GED/college)                               0%                                 8%
        Job training                                          0%                                 8%
        Access to medical services                            0%                                 4%
Source: 2011 Ways to Work Local Site Survey

Figure 2-27 shows the percentage of sites that rely on referral to outside agencies for the
provision of services or assistance in each of the areas. All of the successful sites refer
borrowers to agencies to obtain assistance in job training, education, and job search, while 68
percent, 64 percent, and 52 percent of the other sites refer borrowers to agencies for this
assistance, respectively.

           Figure 2-27. Percent of Sites Providing Services by Referral to Outside Agencies

                                                        Successful Sites                     Other Sites
        Job training                                         100%                               68%
        Education (GED/college)                              100%                               64%
        Job search                                           100%                               52%
        Access to public benefits                             75%                               84%
        Access to medical services                            75%                               72%
        Access to affordable housing                          75%                               60%
        Credit repair                                         75%                               28%
        Family counseling                                     75%                               28%
        Day care                                              50%                               60%
        Job retention                                         50%                               52%
        Life skills (goals, action steps)                     25%                               36%
        Financial literacy classes                            0%                                16%
Source: 2011 Ways to Work Local Site Survey, 2011 Way to Work Borrower Survey

Figure 2-28 shows the percentage of sites that do not offer any assistance in these areas. Two
of the four successful sites indicate that they do not provide any job retention services, while
one of the four successful sites does not provide access to medical services, affordable
housing, and public benefits or day care. The proportion of other sites that do not offer these
services are all lower, except for day care, where a greater proportion of successful sites
provide this assistance either directly or by referring borrowers to an agency.


December 2011                                                                                                         34
                                                                            Ways to Work 2011 Program Outcomes Study

                              Figure 2-28. Percent of Sites Not Offering Services

                                                       Successful Sites                  Other Sites
       Job retention                                         50%                            28%
       Day care                                              25%                            36%
       Access to medical services                            25%                            16%
       Access to public benefits                             25%                             4%
       Access to affordable housing                          25%                             4%
       Education (GED/college)                               0%                             24%
       Job training                                          0%                             20%
       Job search                                            0%                             16%
       Life skills (goals, action steps)                     0%                             16%
       Family counseling                                     0%                             12%
       Credit repair                                         0%                              4%
       Financial literacy classes                            0%                              0%
      Source: 2011 Ways to Work Local Site Survey, 2011 Way to Work Borrower Survey

The Ways to Work local sites all provide some sort of services related to purchasing and
maintaining cars. A greater percentage of successful sites provide services related to helping
the borrowers select cars to purchase, finding affordable car insurance, and identifying useful
coupons and discounts than the other sites do (see Figure 2-29). Successful sites do not
indicate that they offer car maintenance classes or help borrowers to service or repair the car.




December 2011                                                                                                     35
                                                                                  Ways to Work 2011 Program Outcomes Study

                      Figure 2-29. Percent of Sites Offering Car Purchase and Maintenance Assistance

                            100%
                   100%

                   90%
                                  79%
                   80%                                      75%                           75%

                   70%                                            66%           66%
Percent of Sites




                   60%

                   50%
                                                                                                          Succesful sites
                   40%                                                                          34%
                                                                                                          Other sites
                   30%
                                                   21%
                   20%

                   10%
                                              0%                           0%
                    0%
                            Helping to      Offering Car      Finding       Helping to     Identifying
                          Select a Car to   Maintenance    Affordable Car Service/Repair Useful Coupons
                             Purchase         Classes        Insurance       the Car     and Discounts
                                                            Service

Source: 2011 Ways to Work Local Site Survey


2.6. Conclusions
Overall, the Ways to Work program demonstrates the ability to help low-income working families
improve their financial security. The process for assessing borrower motivation at intake,
providing car maintenance counseling, and providing loan payment counseling and case
management are the activities that help eligible borrowers connect with cars and loans. With
access to reliable cars, borrowers can improve their employment circumstances, further their
education, increase their income, reduce use of public assistance, and improve their quality of
life and care for children. The loan and the financial education that are part of this program give
borrowers the opportunity to strengthen their financial management skills, access traditional
financial markets, and improve their credit score through timely repayment.

In summary, this Program Outcomes Study finds:

                     Borrowers are able to increase their wages after participating in the Ways to Work
                     program. Of the 318 respondents who report having an income, 47 percent indicated
                     increases in their income since taking out the loan. Thirty-five (35) percent experienced
                     an increase of more than 10 percent.

                     Ways to Work borrowers are advancing their educational careers after receiving their
                     loans. About 26 percent of respondents indicated increases in their educational
                     attainment since receiving the loan. The most common transition was going from a high
                     school degree to completing some college courses.

December 2011                                                                                                               36
                                                                Ways to Work 2011 Program Outcomes Study

        More Ways to Work borrowers joined the mainstream financial marketplace after
        receiving their loans. Of the 114 survey respondents who did not have a checking
        account at the time of the Ways to Work loan, 50 percent have opened a checking
        account since receiving the loan. Of the 194 respondents who did not have a savings
        account at the time of the Ways to Work loan, 35 percent have opened a savings
        account since receiving the loan. Twenty-four (24) percent of respondents indicated they
        have taken out another loan to support household needs since the Ways to Work loan.

        Borrowers are demonstrating their financial literacy though concrete actions: 61 percent
        of respondents have pulled their credit report in the past year, and 53 percent are saving
        for a rainy day/emergencies. Of the respondents who did not have checking accounts
        when they took out the Ways to Work loan, 50 percent have opened one since.
        Though the role of local financial institution partners has changed with the establishment
        of centralized lending, financial institutions are still involved with local sites. Financial
        institutions are still very engaged with loan committee activities and conducting more
        financial education for Ways to Work borrowers than in 2006, though they are supporting
        fewer sites financially now.
        Sites that produce a higher proportion of successful borrowers are more likely to focus
        their time on providing support and building relationships with borrowers before the car
        purchase happens and prioritize helping borrowers build life skills including setting goals
        and developing action plans.




December 2011                                                                                         37
Credit Impact Study
                                                                       Ways to Work 2011 Credit Impact Study


3. Credit Impact Study
3.1. Introduction
A credit score is based on an individual’s payment history with previous and current lines of
credit. Creditors report on a person’s payment record to the three credit bureaus—TransUnion,
Experian, and Equifax—which then compile the information to ―grade‖ each customer on his or
her personal credit history. The common model they each use is the VantageScore®, in which
scores range from 501 to 990. To put credit scores in a context most people would understand,
the credit bureaus have assigned letter grades of ―A‖ through ―F‖ to ranges of scores (see
Figure 3-1).

   Figure 3-1. VantageScore Ranges Corresponding With Letter Grades and Lending Categories

                     VantageScore Range         Grade    Lending Categories
                            901-990               A         Super Prime
                            801-900               B          Prime Plus
                            701-800               C            Prime
                            601-700               D          Non-Prime
                            501-600               F          High Risk
                    Source: Experian, www.experian.com


A low credit score begets higher cost on all types of financing, from large asset purchases to
day-to-day credit card charges. It can increase the cost of getting a cell phone or insurance. A
poor credit score can even threaten an individual’s ability to get an apartment or a job, blocking
them from rebuilding their finances. Improving a credit score, even a handful of points if it’s
enough to bring one to the next grade range of scores, allows access to lower rates and more
favorable products.

Improving a credit score involves remediating negative items and establishing a positive
payment history on active accounts. Ways to Work helps its borrowers do both. It offers credit
education to borrowers who want to learn how to challenge incorrect items on their credit report
and pay off outstanding debts expeditiously. The Ways to Work loan itself provides an
opportunity to establish a positive credit history; Ways to Work reports borrowers’ monthly
payments to two of the three credit bureaus (TransUnion and Experian).

While the FICO® score continues to be the best known and most commonly used credit scoring
model, we used VantageScore for this evaluation. For the purposes of the Credit Impact Study,
VantageScore provided a more cost-effective solution to obtain and comprehensively compare
credit scores of the Ways to Work borrowers.

3.1.1. Study Overview
The 2011 Credit Impact Study examines the evaluation questions:

        What is the impact of participation in Ways to Work on borrower credit scores? How
        does this impact compare to those of non-participants with similar baseline credit
        scores?




December 2011                                                                                             38
                                                                                   Ways to Work 2011 Credit Impact Study

The study contributes to our knowledge by examining Ways to Work borrowers’ credit scores
over various periods of time to look for trends among groups of borrowers. We used archived
credit data provided by TransUnion, alongside administrative data provided by Ways to Work, to
perform three sets of analysis:

        One- and two-year changes in credit score for Ways to Work borrowers
        Longitudinal score trends for earlier Ways to Work borrowers
        Differences in score outcomes between Ways to Work borrowers and a comparison
        group

In all cases, we examined a subsection of the annual volume of borrowers, those with loan start
dates of December to February of a given period (e.g., one group would be borrowers who
received loans December 2001 through February 2002). This approach was initiated in the 2007
Ways to Work Credit Impact Study; there is no seasonality of the Ways to Work program that
would cause this subsection of borrowers to be different from borrowers who received their loan
other times throughout the year. Figure 3-2 outlines this approach, showing how borrowers were
organized into cohorts and groups based on their program entry date.

                   Figure 3-2. Credit Impact Study Cohort and Group Schedule
                                Cohort 1                                    Cohort 2
                Group 1: Program Entry December            Group 8: Program Entry December
                         2001 to February 2002*                     2008 to February 2009***
                Group 2: Program Entry December            Group 9: Program Entry December
                         2002 to February 2003*                     2009 to February 2010***
                Group 3: Program Entry December            Group 10: Program Entry December
                         2003 to February 2004*                     2010 to February 2011****
                Group 4: Program Entry December
                         2004 to February 2005*
                Group 5: Program Entry December
                         2005 to February 2006*
                Group 6: Program Entry December
                         2006 to February 2007**
                Group 7: Program Entry December
                         2007 to February 2008**
                 * Examined in 2007, 2009 and 2011 Credit Impact Studies
                 ** Examined in 2009 and 2011 Credit Impact Studies
                 *** Examined in 2011 Credit Impact Study
                 **** Not examined in 2011 Credit Impact Study; loan was too recent.


For each group of borrowers, we examined credit score outcome differences between defaulters
(those who received Ways to Work loans but failed to pay them back in full) and non-defaulters
(those who are actively paying off their loans or who have satisfactorily closed out their loans).

The first part of the 2011 study involves exploratory analyses among Ways to Work approved
borrowers, investigating their Year 1 and Year 2 mean differences in credit scores after the start
date of the loan. The focus was on two cohorts of participants: Cohort 1 was borrowers who
initiated loans between 2001 and early 2008 while Cohort 2 was borrowers who initiated loans
more recently between late 2008 and early 2010. We chose to look at one- and two-year
outcomes because of the timeframe of the Ways to Work loan and responsiveness of credit
scoring—adding positive history and fixing derogatory history can improve one’s score in as little

December 2011                                                                                                         39
                                                                   Ways to Work 2011 Credit Impact Study

as six months, but continuing to make payments over the full term of the Ways to Work loan
should have the strongest positive effect. Changes in credit score were assessed by looking at
simple year-by-year mean differences, with application of univariate analysis of variance
(ANOVA) models to assess the statistical significance of these differences.

The second part of the 2011 credit impact study examines the overall long-term changes
between initial and final data for earlier participants who initiated a loan between December
2001 and February 2002 (Group 1), December 2002 and February 2003 (Group 2), and
December 2003 to February 2004 (Group 3). The average credit scores for all three groups by
default status were compared over time. For these groups we also investigated whether the
economic recession (defined as starting in late 2007/early 2008) had an impact on their later
credit scores by comparing their scores to those who were accepted by Ways to Work during
the same time frame but defaulted on their loans. Again, this part of the study looked at year-by-
year mean differences and applied univariate ANOVA models to assess statistical significance.

The third part of the 2011 credit impact study examines the differences between Ways to Work
borrowers and a comparison group of non-Ways to Work borrowers at three different points in
time of their credit history. The comparison group was drawn from TransUnion databases and
represents a sample of individuals who, based on their credit status, geographic location, and
background characteristics, likely would have been eligible to participate in the Ways to Work
program but did not. These non-Ways to Work borrowers were then ―matched‖ to actual Ways
to Work borrowers with similar characteristics in Group 7 (December 2007 to February 2008),
Group 8 (December 2008 to February 2009), and Group 9 (December 2009 to February 2010),
and changes in their credit scores over time were analyzed. More details about the methodology
of selecting the comparison group are provided in the following sections as well as in Appendix
A.

In each part of the study, we use the VantageScore credit score as the measure of an
individual’s credit status. Additionally, we analyze participants’ TransUnion Auto Model credit
scores in the third part of the study. The number of participants assessed for each of the three
analyses differed depending on the number of cases with complete initial and subsequent credit
score data.

3.1.2. Changes in Approach From Earlier Credit Impact Studies
Similar to the process used in the 2009 Credit Impact Study, in this study we examined the one-
year credit score changes for Ways to Work borrowers, including the two newly introduced
groups of borrowers who initiated loans more recently between late 2008 and early 2010. Unlike
the groupings used in the 2009 study, though, for this study the borrowers who were examined
in the 2009 study were grouped into one cohort (Cohort 1), and the two new groups of
borrowers who initiated loans during and after the completion of the 2009 Credit Impact Study
formed a second cohort (Cohort 2).

The 2011 Credit Impact Study makes other advances in its approach to examining the data to
find meaningful outcomes among Ways to Work borrowers. First, in addition to the one-year
credit score change examined in 2009, the 2011 study also investigates the two-year credit
score changes for all groups of borrowers who initiated a loan between 2001 and 2010.
Analyzing two-year changes in credit scores captures the strongest short-term effects during the
full loan term of the typical Ways to Work borrower. Second, because we now have a longer
range of data to work with, the 2011 Credit Impact Study examines the progression of the credit

December 2011                                                                                         40
                                                                    Ways to Work 2011 Credit Impact Study

score history for three early groups of borrowers from the point at which they initiated their loans
through 2011, up to nine years of data in some cases. Contrary to the 2009 study, we did not
examine cumulative changes over time, but the focus was to understand the program’s long-
term effects by examining separately three groups of earlier cohorts and their annual average
changes. Finally, the major improvement of the 2011 Credit Impact Study is the introduction of
three comparison group studies with samples of non-Ways to Work participants. Using the
comparison groups brings a new perspective of examining the program’s effectiveness by
comparing Ways to Work borrowers to a demographically comparable sample of non-Ways to
Work borrowers with similar credit score history at the point of loan origination. This part of the
study affirmed the positive findings of the short- and long-term exploratory analyses that credit
score changes could be strongly associated to program involvement.

3.2. One- and Two-Year Changes in Credit Score
Ways to Work reports that 1,097 borrowers initiated Ways to Work loans between December
and the following February of the years 2001 through 2007 (Cohort 1) and that 260 borrowers
initiated Ways to Work loans between December and the following February of the years 2008
through 2010 (Cohort 2). Background characteristics of the two groups of borrowers are
presented in Figure 3-3. Ways to Work generally targets working poor families with challenged
credit histories.

Figure 3-3 presents administrative data from the borrowers’ applications that provides insight
into the criteria used to select borrowers for Ways to Work loans. As the data show, a majority
of Ways to Work borrowers are women, representing 78 percent of the borrowers from Cohort 1
and 85 percent of the borrowers from Cohort 2. Additionally, the data in Figure 3-3 reveal that a
large percentage of these borrowers are African American, with 50 percent of Cohort 1
borrowers and 58 percent of Cohort 2 borrowers coming from this demographic group. Other
common characteristics of Ways to Work borrowers are being single or unmarried (53 percent
and 65 percent for Cohort 1 and 2 borrowers, respectively), renting instead of owning a home or
having some other living situation (68 percent for Cohort 1 and 74 percent for Cohort 2
borrowers), and being between 33 and 34 years of age. In terms of financial status, on average,
Cohort 1 borrowers had an annual gross income including public assistance of $12,000 while
Cohort 2 participants had an average annual gross income including public assistance that was
a little less than $18,000. The average approved loan amount for both cohorts was between
$3,000 and $3,400, with a little more than 90 percent of the approved borrowers receiving a
loan for purchasing a car.




December 2011                                                                                          41
                                                                               Ways to Work 2011 Credit Impact Study

                        Figure 3-3. Demographics of Cohort 1 and Cohort 2 Participants

                                                              Cohort 1                 Cohort 2
                              Characteristics
                                                      N=1,097            %      N=260         %
                Gender
                Female                                 854           78%         221         85%
                Male                                   104           9%           30         12%
                Missing                                139           13%          9          3%
                Ethnicity
                African American                       550           50%         150         58%
                Asian / Pacific Islander                15           1%           1          0%
                Hispanic / Latino                       70           6%           20         8%
                Native American                         6            1%           5          2%
                White                                  235           21%          65         25%
                N/A / Other                             41           3%           4          2%
                Missing                                180           16%          15         6%
                Marital Status
                Divorced / Separated                   203           19%          40         15%
                Living Together                         16           1%           2          1%
                Married                                127           12%          31         12%
                Single / Unmarried                     581           53%         169         65%
                Widowed                                 2            0%           3          1%
                Other                                   9            1%           2          1%
                Missing                                159           14%          13         5%
                Housing Type
                Own                                     86           8%           17         7%
                Renting                                750           68%         193         74%
                Living with Family / Friend             66           6%           23         9%
                Shelter / Other                         6            0%           2          1%
                Missing                                189           17%          25         10%
                Loan Request Type
                Car Purchase                           997           91%         238         92%
                Car Repairs                             55           5%           7          3%
                Housing / Rent                          30           3%           0          0%
                Other                                   14           1%           1          0%
                Missing                                 1            0%           14         5%
                Other                                 N=1,097       Mean        N=260       Mean
                Average Loan Amount                    859        $2,974.51      240      $3,366.25
                Average Age at Loan Application        1034              34      229          33
                Average Total Annual Gross Income
                Including Public Assistance at Loan    859        $11,979.05     225      $17,766.68
                Application
Source: GreenLight data


December 2011                                                                                                     42
                                                                                             Ways to Work 2011 Credit Impact Study




Figure 3-4 provides a snapshot of one-year mean score changes for Ways to Work borrowers
by loan initiation period, both for defaulters and non-defaulters. Only borrowers from Cohorts 1
and 2 with complete initial and one-year after credit score data were analyzed. As shown in
Figure 3-4, all groups of Cohort 1 non-defaulters showed positive changes, with the first three
groups studied reporting significant changes in their credit scores. The 2002 to 2003 borrowers
reported the largest gains (a 20.3-point gain) followed by 2001 to 2002 borrowers with a 17.4-
point gain, and finally by 2003 to 2004 borrowers with a 14.9-point gain. The majority of Cohort
1 defaulters, however, reported substantial reductions in their scores.

Between 2002 and 2005, Cohort 1 borrowers who had not defaulted achieved increases in their
credit scores from 5.8 to 20.3 points while the scores of borrowers who defaulted declined from
1.2 to 23 points. The gap between defaulters and non-defaulters was even more pronounced
among Cohort 2 borrowers. Overall credit score data show that Cohort 2 defaulters did not have
similar levels of success compared to the Cohort 2 non-defaulters in increasing their credit
scores from loan origination to a year after.

                     Figure 3-4. One-Year Mean Changes in VantageScore Credit Scores

                                                   Defaulters                                        Non-Defaulters

                                          Initial Average                                      Initial Average
Cohort 1                        n=                              Mean Change          n=                           Mean Change
                                          Score                                                Score
Group 1 (Dec01-Feb02)           19        559                   -23.1***             57        559                17.4**
Group 2 (Dec02-Feb03)           27        542                   -1.2                 71        567                20.3***
Group 3 (Dec03-Feb04)           11        555                   1.5                  103       569                14.9***
Group 4 (Dec04-Feb05)           23        543                   -17.6*               145       580                5.8
Group 5 (Dec05-Feb06)           4         n/a                   n/a                  234       574                3.9
Group 6 (Dec06-Feb07)           31        564                   -26.4**              160       577                5.0
Group 7 (Dec07-Feb08)           11        548                   -20.6*               160       576                6.2
      Total                     126       551                   -14.6**              930       574                7.3**

Cohort 2

Group 8 (Dec08-Feb09)           1         n/a                   n/a                  174       565                6.8*
Group 9 (Dec09-Feb10)           15        590                   -33.9**              70        565                6.1
      Total                     16        593                   -31.1**              244       565                6.6**
Significance: *p<.1; **p<.05; ***p<.01; ****p<.001 (Note: Results are not reported for fewer than five cases)
Sources: GreenLight data; 2011 TransUnion data

Changes in participants’ credit scores were also compared from their initial start date to two
years after, shown in Figure 3-5. After two years, borrowers who initiated loans between 2001
and 2004 continued to increase their credit scores, with 2002 to 2003 non-defaulters showing a
significant increase of 36.5 points. Among Cohort 1 non-defaulters, significant increases were
also reported for 2003 to 2004 borrowers (13 points) followed by 2006 to 2007 borrowers (11
points) and 2007 to 2008 borrowers (9.5 points). We observed similar patterns for Cohort 2 non-
defaulters, who saw a 13.3 increase in their credit scores after two years. Borrowers who
defaulted mainly reported losses in their credit scores, with the exception of 2003 to 2004 and
2007 to 2008 defaulters, who both had gains but not of statistical significance (i.e., differences
that were probably just due to chance). Overall, Ways to Work non-defaulters significantly

December 2011                                                                                                                   43
                                                                   Ways to Work 2011 Credit Impact Study

increased their credit scores two years following their participation in the Ways to Work
program, while defaulters showed a substantial average decrease in the total change scores.

In terms of credit rating grade, for both non-defaulters and defaulters the initial average score
was below 600, which equates to an ―F‖ grade according to VantageScore. While defaulters
were unable to increase their credit scores, it is likely that the increase in credit scores
experienced by some non-defaulters was enough to push them into the next credit-score grade
of ―D.‖ This improvement is especially true for 2002 to 2003 non-defaulters who started with an
average score of 583, for whom a 36.5-point increase would have put an average participant at
a credit score of around 619.
Source: GreenLight Data




December 2011                                                                                         44
                                                                                             Ways to Work 2011 Credit Impact Study




                     Figure 3-5. Two-Year Mean Changes in VantageScore Credit Scores

                                                   Defaulters                                         Non-Defaulters

                                          Initial Average                                      Initial Average
Cohort 1                        n=                              Mean Change          n=                           Mean Change
                                          Score                                                Score
Group 1 (Dec01-Feb02)             18             563                 -26.1**            48             561                8.3
Group 2 (Dec02-Feb03)             21             556                  -12.0             66             563             36.5****
Group 3 (Dec03-Feb04)             10             552                    3.7             98             571              12.9**
Group 4 (Dec04-Feb05)             28             543                   -7.8            172             580               -6.8
Group 5 (Dec05-Feb06)             4              n/a                    n/a            229             574                1.2
Group 6 (Dec06-Feb07)             31             564                 -25.4**           160             577              11.0**
Group 7 (Dec07-Feb08)             11             548                    7.3            161             576              9.5**
Total                            123             554                 -11.8**           934             574              6.9**

Cohort 2

Group 8 (Dec08-Feb09)              1             n/a                   n/a             174             565             13.3***
Group 9 (Dec09-Feb10)              -              -                     -               -               -                 -
Total                              1             n/a                   n/a             174             565             13.3***
Significance: *p<.1; **p<.05; ***p<.01; ****p<.001 (Note: Results are not reported for fewer than five cases)
Sources: GreenLight data; 2011 TransUnion data


3.3. Longitudinal Score Trends for Earlier Borrowers
In the second part of the 2011 Credit Impact Study, we examined the average changes in
VantageScore credit scores over years for a sample of earlier Ways to Work participants who
initiated a loan between 2001 and 2004. Exploratory trend analysis was used to compare
changes in credit score history between Ways to Work borrowers who defaulted on their loan
within the same origination period versus borrowers who did not default across time. These
trend analyses were again restricted to samples that had complete credit score data for all
follow-on time points. As such, the means and the significance levels differ from the one-year
and two-year change analysis results reported earlier.

Figure 3-6 displays the demographic data of the three groups of borrowers used in the
longitudinal analysis. Across all three groups, the majority of participants were female (ranging
from 82 to 90 percent), and most were not married (53 percent for Group 1 and more than 60
percent for Groups 2 and 3). Almost half of 2001 to 2002 and 2003 to 2004 participants were
African American, as were 62 percent of 2002 to 2003 participants. Two-thirds of borrowers in
all of the groups reported renting rather than owning a home. Additionally, the average total
annual gross income including public assistance of Ways to Work borrowers in this sample
ranged from $10,449 to $13,337, with an average loan amount ranging from $2,228 to $2,782.

The administrative data also show that among all three groups, the majority of the participants
(86 percent for 2001 to 2002 and 2003 to 2004 borrowers, and 94 percent for 2002 to 2003
borrowers) used their loans to purchase a car.




December 2011                                                                                                                     45
                                                                          Ways to Work 2011 Credit Impact Study

            Figure 3-6. Demographics of Longitudinal Samples of Ways to Work Borrowers

                                        Group 1                 Group 2                        Group 3
                                 n=49             %      n=78              %            n=98             %
Gender
Female                            40              82%     70              90%            80              82%
Male                               8              16%     5                6%             9              9%
Missing                            1               2%     3                4%             9              9%
Ethnicity
African American                  22              45%     48              62%            42              43%
Asian / Pacific Islander           1               2%     8               10%             3              3%
Hispanic / Latin                   4               8%     1                1%             7              7%
White                             14              29%     9               12%            27              28%
N/A / Other                        2               4%     8               10%             5              5%
Missing                            6              12%     4                5%            14              14%
Marital Status
Divorced / Separated              11              22%     16              21%            13              13%
Living Together                    1               2%     1                1%             0              0%
Married                            7              14%     7                9%            15              15%
Single / Unmarried                26              53%     49              63%            64              65%
Widowed                            0               0%     0                0%             1              1%
Other                              0               0%     1                1%             0              0%
Missing                            4               8%     4                5%             5              5%
Housing Type
Own                                6              12%     5                6%             9              9%
Renting                           34              69%     59              76%            75              77%
Living with Family / Friend        0               0%     7                9%             1              1%
Shelter / Other                    0               0%     0                0%             0              0%
Missing                            9              18%     7                9%            13              13%
Loan Request Type
Car Purchase                      42              86%     73              94%            84              86%
Car Repairs                        5              10%     2                3%             6              6%
Housing / Rent                     2               4%     1                1%             4              4%
Other                              0               0%     2                3%             4              4%
Missing                            0               0%     0                0%             0              0%
Other
Average Loan Amount               49         $2,228.57    78         $2,712.82           98         $2,781.63
Average Age at Loan
                                  49              35      78               34            98              34
Application
Average Total Annual Gross
Income Including Public           49        $13,336.73    78        $10,448.72           98        $13,066.00
Assistance at Loan Application
Source: GreenLight data


A year-by-year analysis of the credit score data for all three groups of borrowers largely shows
non-defaulters exceeding defaulters over time. Figures 3-8, 3-9, and 3-10 provide the credit
score trends of 2001 to 2002, 2002 to 2003, and 2003 to 2004 defaulters and non-defaulters,
respectively. Although both defaulters and non-defaulters who initiated loans between
December 2001 and February 2002 started with similar credit ratings, the non-defaulters had a

December 2011                                                                                                  46
                                                                                         Ways to Work 2011 Credit Impact Study

13.7 percent increase a year after the loan origination and retained higher average scores in all
follow-on time points. While the non-defaulters gradually increased their rates, defaulters
showed consistently decreasing scores across time. In particular, defaulters’ credit scores
dropped substantially between 2007 and 2008 from their initial scores in 2002. On contrary, the
non-defaulters increased their scores on average and their rates exceeded defaulters’ rates by
60 or more points Similarly, in 2010 and 2011 non-defaulters also had larger credit score rates
than the defaulters, and for non-defaulters those changes from their initial scores were
significant (i.e., differences that were probably not caused solely by chance).

The 2002 to 2003 non-defaulters showed substantial improvements in credit score ratings over
the eight-year period, with average rates remaining slightly above a 600 credit score from 2007
to 2011. This credit score rating correlates with an average change in credit grade from ―F‖ to a
rating of ―D‖ for Group 2 non-defaulters from January 2005 onward. On the other hand, 2002 to
2003 defaulters experienced a significant decrease in their scores in 2008. After 2008, however
the 2002 to 2003 defaulters did manage to slightly improve their rates and, at the last follow-on
time point (2011), their credit score rating was 585. This rate reflects an increase from the initial
credit score data by 30 points (Figure 3-7). Still the highest gains were reported among non-
defaulters who experienced an increase of 44.6 points from 2003 to 2011.



Figure 3-7. Mean Changes in VantageScore Credit Scores Over Time

                                          Year       Year     Year     Year     Year      Year     Year     Year     Year
                               Base
                                           1          2        3        4        5         6        7        8        9
 Group 1
                               Jan 02    Jan 03      Jan 04   Jan 05   Jan 06   Jan 07   Jan 08   Jan 09   Jan 10    Jan 11
 (2001-2002)
 Default (n=13)                563.9     543.3       538.4    548.8    543.7    523.8     527.8    536.6    544.1    554.2
 Non-Default (n=36)            565.1     578.8       575.4    586.0    601.9    598.4     596.5    599.0    595.0    595.9
 Group 2
                               Jan 03    Jan 04      Jan 05   Jan 06   Jan 07   Jan 08   Jan 09   Jan 10   Jan 11
 (2002-2003)
 Default (n=18)                554.9     538.6       542.8    534.2    562.4    544.3     559.2    577.2    585.0     n/a
 Non-Default (n=60)            565.9     588.3       602.8    593.7    607.9    607.0     603.8    607.1    610.5     n/a
 Group 3
                               Jan 04    Jan 05      Jan 06   Jan 07   Jan 08   Jan 09   Jan 10   Jan 11
 (2003-2004)
 Default (n=8)                 556.0     561.3       552.6    555.5    573.8    578.5     583.9    578.8     n/a      n/a
 Non-Default (n=90)            573.9     587.3       585.7    576.0    577.6    583.8     590.2    597.6     n/a      n/a
Significance: *p<.1; **p<.05; ***p<.01; ****p<.001
Sources: GreenLight data; 2011 TransUnion data

Among the borrowers who were approved for a Ways to Work loan in 2004, both non-defaulters
and defaulters reported a gain of more than 20 points in their credit scores from 2004 to 2011.
Particularly, the rates for the 2003 to 2004 defaulters show increases from 2008 to 2011, but
those changes were not statistically significant; while non-defaulters’ rates went up more than
seven points each year from 2008 to 2011, the reported changes from baseline were substantial
in 2010 and 2011. Further details are included in Figure 3-7.




December 2011                                                                                                                 47
                                                                                     Ways to Work 2011 Credit Impact Study

                                              Figure 3-8. Group 1 Longitudinal Data

                   620
                                                                                         Year 9
                                                                                          596
                   600
                         Loan Start
                   580      565
                                                                                                        Group 1
    Credit Score




                   560                                                                                  Non-
                                                                                                        Defaulters
                                                                                         Year 9         (n=36)
                   540
                         Loan Start                                                       554
                            564                                                                         Group 1
                   520                                                                                  Defaulters
                                                                                                        (n=13)
                   500

                   480
                                2003           2005          2007          2009          2011
                                                         Year
Source: 2011 TransUnion data


                                              Figure 3-9. Group 2 Longitudinal Data

                   620                                                               Year 8
                                                                                      611
                   600   Loan Start
                            566                                                      Year 8
                   580                                                                585
                                                                                                        Group 2
    Credit Score




                   560                                                                                  Non-
                                                                                                        Defaulters
                                                                                                        (n=60)
                   540
                         Loan Start                                                                     Group 2
                   520      555                                                                         Defaulters
                                                                                                        (n=18)
                   500

                   480
                         2003          2005           2007          2009          2011
                                                         Year
Source: 2011 TransUnion data




December 2011                                                                                                           48
                                                                                Ways to Work 2011 Credit Impact Study

                                       Figure 3-10. Group 3 Longitudinal Data

                    610

                    600                                                Year 7
                          Loan Start                                    598
                    590      574
                                                                                                   Group 3
                    580
     Credit Score




                                                                       Year 7                      Non-
                    570                                                 579                        Defaulters
                                                                                                   (n=90)
                    560                                                                            Group 3
                                                                                                   Defaulters
                    550   Loan Start                                                               (n=8)
                             556
                    540

                    530
                                2005     2007        2009          2011
                                                  Year
Source: 2011 TransUnion data

3.4. Comparison Study
One of the centerpieces of this evaluation was the quasi-experimental design used in the third
part of the study, analyzing differences in credit scores between Ways to Work non-defaulters
and non-Ways to Work borrowers. Developing a comparison group allowed us to estimate what
would have happened to someone’s credit in the absence of a Ways to Work loan. Non-Ways to
Work borrowers were chosen using propensity score matching. This process is described in
further detail in Appendix A. We examined three groups of Ways to Work non-defaulters who
initiated their loans in three different years. The first two groups were matched to a comparison
group based on their 2007 credit scores and consisted of borrowers who received a loan in
December 2006 to February 2007 and in December 2007 to February 2008. The third group
consisted of borrowers matched to a comparison group based on their 2009 credit scores and
included Ways to Work non-defaulters who initiated loans in the December 2008 to February
2009 time period. Only those Ways to Work non-defaulters with a TransUnion Auto Model
(TRAU) credit score12 of 540 and below were matched.

We performed an ANCOVA to look for notable differences in 2011 TRAU credit score and
VantageScores between Ways to Work non-defaulters and their comparison groups from each
group’s initial credit data. In absence of initial credit score data for 2007 to 2008, we examined
the differences in credit score between 2007 to 2008 participants and their comparison group
starting one year before loan receipt. The findings are not based on an experimental study,
however, so even with the strength of this design to identify comparable non-Ways to Work
counterparts based on several demographics from the same states as the Ways to Work

12
  ―The TransUnion Auto Model, an industry-specific risk model, offers more accurate predictions on non-prime and
sub-prime applicants. Designed to meet the needs of financing companies and automobile dealers, the model
predicts the likelihood of a prospect or existing loan holder becoming 60 or more days delinquent in a 12-month
period.‖ Retrieved on October 12 2011 from http://www.transunion.com/.

December 2011                                                                                                      49
                                                                      Ways to Work 2011 Credit Impact Study

borrowers, other factors may have still contributed to the observed changes in credit score
outcomes. For each set of comparisons, we conducted a t-test on the difference in credit rates
from 2007 to 2008, and from 2009 to 2011. Columns three and four of Figures 3-11, 3-12, and
3-13 show the average credit scores for Ways to Work and non-Ways to Work participants.
Finally, the last column of each figure contains averages for all other unmatched Ways to Work
non-defaulters as a reference group.

    Figure 3-11. 2007, 2009, and 2011 Average TransUnion Auto Model and VantageScore Credit
                   Scores For 2006-2007 Non-Defaulters and Comparison Group
                                               Non-Ways to
                                Ways to Work                                              Unmatched Ways
                                                  Work
 Year        Average Score       Borrowers                   Difference   Significance     to Work Cases
                                                Borrowers
                                  (n=61)                                                       (n=98)
                                                 (n=61)
           TransUnion Auto
                                    474           472           02            .837               527
2007       Model credit score
           VantageScore             537           530           07            .133               603
           TransUnion Auto
                                    493           479           14            .185               527
2009       Model credit score
           VantageScore             567           562           05            .585               602
           TransUnion Auto
                                    507           500           07            .163               530
2011       Model credit score
           VantageScore             579           563           16            .085               598
Source: 2011 TransUnion data

Overall, the findings show improvement from the 2007 credit score averages for both 2006 to
2007 and 2007 to 2008 Ways to Work non-defaulters and their comparison groups. While
average TRAU and VantageScore credit scores in both sets of participants improved in 2009
and 2011, gains by Ways to Work borrowers were consistently higher. As shown in Figure 3-11,
2006 to 2007 Ways to Work borrowers had a substantial increase of 42 points in their 2011
VantageScores four years after loan origination, while the comparison group only increased
their VantageScores by 33 points above their initial average. Even after adjusting for initial
differences in their 2007 credit data, the 16-point difference between the 2006 to 2007 Ways to
Work borrowers and their comparison cases was statistically significant. Moreover, the
unmatched 2006 to 2007 Ways to Work non-defaulters slightly decreased their VantageScores
from 2007 to 2011 by 5 points.

In addition, compared to 2007, the 2007 to 2008 Ways to Work borrowers significantly
increased their VantageScores by 36 points in 2011. Their comparison group also increased
their VantageScores considerably, by 25 points, but the average gains reported for Ways to
Work borrowers were higher, by 16 points. Similarly, 2007 to 2008 Ways to Work borrowers
showed higher average gains in their TRAU credit scores than their comparison group, by 20
points. Figure 3-12 also shows that the unmatched 2007 to 2008 Ways to Work non-defaulters
on the whole improved their credit scores by an average of 5 points.




December 2011                                                                                            50
                                                                      Ways to Work 2011 Credit Impact Study

    Figure 3-12. 2007, 2009, and 2011 Average TransUnion Auto Model and VantageScore Credit
                   Scores For 2007-2008 Non-Defaulters and Comparison Group
                                               Non-Ways to                                  Unmatched
                                Ways to Work
                                                  Work                                     Ways to Work
 Year        Average Score       Borrowers                   Difference   Significance
                                                Borrowers                                     Cases
                                  (n=60)
                                                 (n=60)                                       (n=79)
           TransUnion Auto
                                    470           473           -03           .633              513
2007       Model credit score
           VantageScore             531           526           05            .141              594
           TransUnion Auto
                                    479           477           01            .724              524
2009       Model credit score
           VantageScore             572           562           10            .403              595
           TransUnion Auto
                                    499           479           20            .094              533
2011       Model credit score
           VantageScore             567           551           16            .039              599
Source: 2011 TransUnion data

Significant average increases in 2011 VantageScore credit scores were also reported for 2008
to 2009 borrowers examined in this study, showing an increase of 28 points two years after
having initiated the loan. As depicted in Figure 3-13, average gains were also reported for the
comparison group, with the non-Ways to Work borrowers having a smaller increase of 19
points, while the unmatched 2008 to 2009 Ways to Work non-defaulters increased their
VantageScores by 5 points.

 Figure 3-13. 2009 and 2011 Average TransUnion Auto Model and VantageScore Credit Scores for
                        2008-2009 Non-Defaulters and Comparison Group
                                               Non-Ways to                                 Unmatched
                                Ways to Work      Work                                    Ways to Work
                                 Borrowers      Borrowers                                    Cases
 Year        Average Score        (n=62)         (n=62)      Difference   Significance       (n=89)
 2009      TransUnion Auto
                                    466           467           -01           .894             497
           Model credit score
           VantageScore             538           537           01            .982             586
 2011      TransUnion Auto
                                    487           486           01            .893             515
           Model credit score
           VantageScore             564           556           07            .357             591
Source: 2011 TransUnion data



3.5. Conclusions and Future Directions
The focus of the first two parts of this Credit Impact Study was to conduct exploratory analyses
to determine the short-term impact of the Ways to Work program on borrowers’ credit scores, as
well as to examine credit score changes over a longer time frame.

The review of short-term changes in borrowers’ credit scores clearly shows that one-year score
improvements were notable among all borrowers who did not default, with earlier borrowers who
initiated loans between 2001 and 2004 reporting the highest gains. Two-year credit score
increases were also reported for the majority of non-defaulting borrowers. For those who
defaulted on their loans, there were no positive one-year changes; instead the majority of
borrowers who defaulted experienced substantial decreases during the first and the second
years after receiving their Ways to Work loans.



December 2011                                                                                            51
                                                                     Ways to Work 2011 Credit Impact Study

Moreover, the exploratory trend analysis found significant gains over time for the earlier groups
of non-defaulters compared to defaulters. Those who did not default on their loans experienced
increases even during the recession period and the most recent credit score data from 2011
shows that 2001 to 2002 and 2002 to 2003 borrowers had a total significant increase of 45 and
31 points, on average.

Results from the quasi-experimental study consistently showed that the three samples of Ways
to Work non-defaulters examined here outperformed their non-Ways to Work borrower
counterparts with regards to credit score. These findings suggest that borrowers with very low
credit scores who receive a Ways to Work loan, and did not default on it, may be more
successful in increasing their credit scores after two to four years following their participation in
the Ways to Work program than demographically similar individuals who did not participate in
the Ways to Work program. While these findings confirm the positive association between Ways
to Work participation and improving credit scores, determining from this data what other factors
might have partially impacted these changes was not feasible. Replication studies with more
detailed data are suggested in order to understand the impact of Ways to Work and non-Ways
to Work borrowers’ context and control for key anticipated biases on variables that historically
are associated with poor credit history, such as low economic status and race/ethnic
background information.

Future research considerations for examining the impact of Ways to Work programs would be to
replicate the comparison group studies with more groups of Ways to Work participants. More
studies comparing earlier groups of borrowers to comparable non-Ways to Work participants
would strengthen the positive attributions that Ways to Work helps people with low credit score
history to improve their economic well-being. Furthermore, subgroup analyses by gender could
reveal whether those changes are more substantial among female or male Ways to Work
borrowers. Moreover, extracting more credit data for the matched cases of Ways to Work and
non-Ways to Work borrowers would reveal the whole spectrum of annual credit score changes
over time instead of limiting the outcome comparisons into two or three time points.

Finally, we highly recommend an improved data collection system across sites for those cases
of borrowers who have reached the maximum of their loan term. We suggest that all sites
gather data periodically to ensure that accurate data are collected for borrowers who have
exhausted the full length of their loan term. Updating the data shortly after a borrower has
finished paying off his or her loan would be a good practice so that precise data are collected on
time.




December 2011                                                                                           52
Return on Investment Study
                                                             Ways to Work 2011 Return on Investment Study


4. Return on Investment Study
4.1. Introduction
Transportation and financial literacy are two important elements to self-sufficiency. The Ways to
Work program addresses both of these critical needs through a program model that
incorporates using reliable payments on an affordable automobile loan as a behavior change
incentive. There are a number of immediate and longer-term outcomes of this program that
accrue to the benefit of a number of different stakeholder audiences, including borrowers,
employers, taxpayers, lenders, and the program as a whole. Each one of these entities also
bears certain costs. The objective of this study was to monetize some of the more important
outcomes in order to calculate the return on investment (ROI) for each of the five stakeholder
groups mentioned.

4.1.1. Methods
Inputs to our ROI model came from four sources: a survey of borrowers with loan start dates
between 2007 and 2010; a survey of the local sites that made loans to borrowers during that
period in time; credit data about Ways to Work borrowers from TransUnion; and comparison
data about groups with similar characteristics as Ways to Work borrowers that came from an
online literature search.

The ROI model used for this study was developed with input from grassroots social service
practitioners to help programs assess the cost-benefits of their program services. The approach
involves projecting costs for situations that would have occurred ―but for‖ the program and
determining the actual probability after participation in the program. This approach has
previously been used for valuation efforts for fatherhood programs funded by the Office of
Family Assistance in the Administration for Children and Families, Department of Health and
Human Services and community-based abstinence education programs funded through the
Family Youth Services Bureau also within the Administration for Children and Families,
Department of Health and Human Services.

In the Ways to Work application of this model, seven key outcomes give rise to the benefits
quantified:

    •   Protect current employment of participants

    •   Enhance job attainment of participants by promoting increased mobility

    •   Support financial literacy and promote participants to open savings accounts

    •   Remove barriers to employment by promoting reliable transportation, which reduces
        work absence or tardiness

    •   Increase income for participants from reliable transportation

    •   Reduce household reliance on public assistance programs

    •   Facilitate households accessing traditional financial markets due to increased credit
        score


December 2011                                                                                          53
                                                            Ways to Work 2011 Return on Investment Study

While these are all borrower-level outcomes, they result in benefits for the rest of the
stakeholders considered. For example, the ROI examines what additional tax revenues are
collected due to increased earnings and increased economic activity under the ―taxpayer‖
stakeholder category. By layering all these benefits—and the resources committed in order to
attain them—we are able to calculate a dollar value of the ROI in Ways to Work.

4.1.2. Limitations of ROI Study
To maximize the utility of an ROI study and reach statistically significant conclusions, robust
pre- and post-program data, cost data, and outcome benefits data must be collected. Cost data
are generally the most accurate and easily gathered data, because grant awards and other
monies that fund social service programs are easy to obtain and track. Program data are
generally collected from the grantee or entity providing the services and activities of the
program. Program data that capture changes or other information on the program participants
are generally obtained through a survey and are dependent on the participants’ willingness to
provide accurate answers. As mentioned, we collected program data for this study from a
survey of borrowers and sites and from credit data. Accurate baseline data on the net benefits
of program activities, which form the basis of the ―return,‖ are much harder to obtain, because
the benefits of program activities can vary greatly from program to program. Characteristics that
can influence program benefits and return include the demographics of populations served, the
geographic region of the program, and the overlying economic and fiscal conditions during the
time of the programs.

The ROI analysis performed here attempts to quantify the return that is provided to each
stakeholder as a result of participants obtaining a loan to purchase a car. Due to limited data,
however, particularly on the net benefits of the activities, actual results can vary greatly.
Because all of the data regarding the return from the various benefits are from a limited set of
studies, obtained from a literature review, and because the results of these studies can be much
different than the results obtained by this population set (given the varying nature of certain
characteristics described previously), the results should be viewed as approximate and in light
of these limitations.

4.1.3. Stakeholder Audiences, Evaluation Questions, and ROI Results
Everyone benefits when at-risk individuals achieve a measure of self-sufficiency; however, each
of the five stakeholder groups has a slightly different perspective on both the costs of the
program and the benefits that accrue. This section explains the evaluation questions posed to
quantify the ROI for each stakeholder group, describes some of the basic assumptions, and
addresses the ROI question by stakeholder group.

WAYS TO WORK PROGRAM – SUM OF ALL STAKEHOLDER AUDIENCES
The combined total annual benefit to all stakeholder audiences is projected to be about $57.7
million for loans made to 4,771 borrowers during the 2007 to 2010 time frame. Total project
costs to administer the Ways to Work program for this same time period was about $23.2
million. This means an estimated $2.48 in benefits are returned for every $1 invested in the
Ways to Work program. We believe these estimates are conservative because they account for
only one year of return even though the benefits that result from the provision of a car and the
financial skills learned are much longer lasting. For this analysis, we sum and compare the one-
year return for each of four cohorts against the sum of costs borne over the same four years.


December 2011                                                                                         54
                                                                  Ways to Work 2011 Return on Investment Study

The resulting ROI is an average ROI of first year benefits for the four cohorts 2007 through
2010.

BORROWERS
The annual benefits for the 4,771 participating borrowers in the 2007 to 2010 timeframe were
approximately $30 million, or $6,300 per borrower. The following are the four evaluation
questions that we sought to explore about the program effects on borrowers, along with an
examination of the 4,771 borrowers who received a Ways to Work loan during the 2007 to 2010
timeframe. The underlying assumptions and calculations to arrive at the dollar figures are
explored in more detail in Section 4.2.

    1. What increase in income—either by keeping a job, receiving a pay increase, or working
       a second job—was experienced by the borrower that resulted from having a reliable
       form of transportation?
        Borrowers increased their income by approximately $7.55 million to $10.2 million among those
        who would have lost their job but for a Ways to Work car loan, plus $2.630 million in incremental
        wages earned.
    2. What decrease in finance charges was enjoyed by borrowers because they no longer
       rely on predatory lenders?
        Approximately $1.2 million in financing and fees are avoided by not using payday loans and
        check cashing outlets, which comes to about $250 per borrower when averaged over all 4,771
        borrowers. These figures do not include savings due to reduced use of Buy Here/Pay Here loans;
        this might make a good topic for future research.

    3. What are the current benefits from borrowers’ increase in purchasing power due to
       access to credit?
        The estimated current direct benefits of $13.7 million in expanded purchasing power is inclusive
        of student loans for college (5 percent of all borrowers) and mortgages (3 percent of all
        borrowers), which equals about $2,900 per borrower when averaged over all 4,771 borrowers.

    4. What are the future benefits from borrowers’ increase in purchasing power due to
       access to credit?
        The net present value (NPV) of lifetime expanded earnings for students who started post-
        secondary education is calculated to be $198 million. The annual aggregate additional net
        earnings are projected to be approximately $4.9 million, which produces an additional $1,035 in
        net earnings per borrower per year when averaged over the 4,771 borrowers over a 40-year
        career.

        Finally, 3 percent of borrowers were able to obtain mortgages and become homeowners. Median
        home prices were up 8.8 percent last year, but because of the vagaries of the housing market, we
        have not placed a value on the benefits of home ownership in this report.

The ROI for borrowers is enormously high in the sense that there is no financial investment
made by the borrowers. The time and transportation costs for meeting with Ways to Work staff
and filling out the loan application are negligible (< $100) when compared against the return of
$6,300 per borrower. This would mean there are about $63 of benefits enjoyed by borrowers for
every $1 of effort they invest in the program.



December 2011                                                                                               55
                                                                Ways to Work 2011 Return on Investment Study

EMPLOYERS
The annual benefit for employers during the four years under analysis was approximately $9.3
million, or $1,950 per borrower when averaged over all 4,771 borrowers. The two evaluation
questions we sought to answer were:

    1. What was the level of cost avoidance enjoyed by employers of Ways to Work borrowers
       due to the avoidance of recruitment and training costs that would otherwise have been
       incurred had the Ways to Work borrower been unable to retain employment?
        The cost avoidance was approximately $3.9 million or about $817.44 per borrower when
        averaged over all 4,771 borrowers.

    2. What was the level of cost avoidance enjoyed by employers of Ways to Work borrowers
       due to the avoidance of productivity losses associated with absenteeism and lateness
       (or leaving early)?
        The cost avoidance was approximately $5.4 million or about $1,130 per borrower when averaged
        over all 4,771 borrowers.

TAXPAYERS
Taxpayers are one of the primary beneficiaries of the Ways to Work program. Additional annual
tax revenue collected and public assistance costs avoided amounted to approximately $18.2
million, or about $3,775 per borrower when averaged over all 4,771 borrowers.

There were two primary evaluation questions that the ROI study focused on in terms of taxpayer
benefit:

    1. What are the additional tax revenues collected due to increased earnings and increased
       economic activity?
        Additional tax revenue of approximately $4.4 million, or about $861 per borrower when averaged
        over all 4,771 borrowers, is collected.
    2. What are the public assistance cost savings due to Ways to Work borrowers who retain
       employment?
        Public assistance outlays of approximately $13.8 million, or $2,900 per borrower when averaged
        over all 4,771 borrowers, are avoided.

LOCAL LENDERS
Local lenders accomplish two achievements when they support the Ways to Work program.
First, they are investing in a new untapped marketplace by helping to bolster the financial
capabilities of borrowers who might not otherwise be able to participate in mainstream financial
markets. By creating a personal relationship with borrowers they are engendering customer
goodwill and loyalty that may last a lifetime. Second, they are fulfilling a tenet of the Community
Reinvestment Act (CRA), which may help raise the bank’s rating to the satisfactory or
outstanding level.

The evaluation questions we examined regarding local lenders are:

    1. What is the direct economic benefit to a local lender for participating in the Ways to Work
       program?

December 2011                                                                                             56
                                                                      Ways to Work 2011 Return on Investment Study

        One projection suggests that each new customer represents (on average) additional income of
        $144 for a financial institution. This figure does not include potential cross-selling of services,
        which may be even more likely in the case of Ways to Work borrowers, who do not have a
        relationship with any other banker. The estimate of $144 multiplied by the 14 percent who open
        checking accounts multiplied by the 4,771 borrowers comes to an economic benefit of $93,685.

    2. Is there a way to quantify the effect on a lending institution’s CRA rating and the CRA
       rating’s effect on a bank’s profitability?
        We have not found a way to quantify the impact of the Ways to Work program on a bank’s
        profitability; this might make a good topic for future research.

4.2. Components of ROI Results by Stakeholder Group
Figure 4-1 displays some key ratios that help summarize the Ways to Work program’s success.

                        Figure 4-1. Select Measures for Ways to Work Program

 Total project costs to administer the Ways to Work program (2007 to 2010)          $23,219,280
 Total project ROI: The total dollar return for every dollar invested through
                                                                                    $2.48
 Ways to Work (2007 to 2010)

 Total project stakeholder ROI: The total dollar return for employers and
                                                                                    $1.19
 taxpayers for every dollar invested through Ways to Work (2007 to 2010)

 Incremental value of each additional success: The total project dollar value of
                                                                                    $12,087
 the benefits per Ways to Work borrower



Figure 4-2 summarizes the pathways to benefits (rows) and the portion of each pathway
garnered by each stakeholder group (columns).




December 2011                                                                                                   57
                                                                              Ways to Work 2011 Return on Investment Study

                 Figure 4-2. Components of the Projected Annual ROI Result, 2007 to 2010

                                                                                              Additional Tax
                Direct Estimated ROI                                                                            Additional
                                           Total Project                                       Revenues/
                    Cost-Benefit                           Savings/Benefits     Savings to                      Earnings
Reference                                    Savings/                                           Reduced
                Measures From Ways                          to Borrowers        Employers                       for Local
                                             Benefits                                           Taxpayer
                to Work Participation                                                                            Lenders
                                                                                                 Costs
                Employment-related
VI-X            savings from owning        $12,937,725       $7,546,488         $3,881,938      $1,509,298         N/A
                a car -- Kept a job
                Employment-related
                savings from owning
XI-XIII                                    $3,156,957        $2,630,797             N/A          $526,159          N/A
                a car -- Increase in
                pay
                Employment-related
                savings from owning
XIV-XV          a car -- Reduced           $5,428,178            N/A            $5,428,178          N/A            N/A
                absenteeism and
                lateness
                Savings from
XVI-XX          avoidance of payday         $422,421          $422,421              N/A             N/A            N/A
                loans
                Savings from
XXI-XXIII       avoidance of check          $780,709          $780,709              N/A             N/A            N/A
                cashers
                Benefits from
                increased access to
XXIV-XXVI                                  $21,034,351       $18,658,254            N/A         $2,376,097         N/A
                credit (i.e., additional
                loans)
                Benefits to local
XXVII                                        $93,685             N/A                N/A             N/A          $93,685
                lenders
                Savings from reduced
XXVIII-XL       reliance on public
                programs
                  Income Support           $6,266,480            N/A                N/A         $6,266,480         N/A
                  Nutrition                $4,553,688            N/A                N/A         $4,553,688         N/A
                  Health                   -$249,244             N/A                N/A         -$249,244          N/A

                 Social Services           $1,841,603            N/A                N/A         $1,841,603         N/A

                 Housing                    $1,402,678           N/A               N/A          $1,402,678         N/A
                SUBTOTAL                   $13,815,204           N/A               N/A         $13,815,204         N/A
                GRAND TOTAL                $57,669,229       $30,038,669        $9,310,117     $18,226,758       $93,685

The following sections explain the calculations and assumptions from research that figured into
the above numbers.

4.2.1. Borrowers
The following subsections deconstruct the $30-million return that accrued to the benefit of the
4,771 borrowers between 2007 and 2010.

EMPLOYMENT-RELATED BENEFIT FROM OWNING A CAR – KEPT A JOB
About $7.5 million of the $30-million borrower return was associated with borrowers who were
able to keep their job in a large measure due to their ability to get to work on time consistently.
This $7.5-million benefit was tallied in the following manner:

December 2011                                                                                                            58
                                                                     Ways to Work 2011 Return on Investment Study

     1. Although 93 percent of all borrowers said that ―access to a car greatly improved [their]
        ability to keep their job,‖ 93 percent of 4,771 = 4,437…

     2. There is an 8.77-percent default rate among Ways to Work borrowers. When we apply
        this average default rate against the 4,437 borrowers, the estimated total defaulters
        equals 389 defaulters. This means that 4,437 – 389, or 4,048 borrowers, would still have
        a Ways to Work financed car bringing them to work.
     3. From a study regarding retention management and metrics at
        http://www.nobscot.com/survey/us_total_separations_0806.cfm, we know that the
        separation rate (the percentage of employees that are either voluntarily or involuntarily
        terminated from employment) for the United States is 40.4 percent per year13. Only 13
        percent of Ways to Work borrowers were no longer employed at the time of the survey.
        The difference, 27.4 percent, is the incremental improvement in retention due to having
        the Ways to Work car.
     4. 27.4 percent of 4,048 = 1,109, the incremental number of borrowers who would
        otherwise have lost their jobs.
     5. From the Bureau of Labor Statistics we know that the average number of weeks to
        obtain a new job = 18
        (http://www.bls.gov/opub/ils/summary_11_01/unemployed_jobs_quit.htm#table1).
     6. During that time, pay loss would equal 40 hours per week x $9.45 per hour (average
        wage of Ways to Work borrower) x 18 weeks = $6,804.
     7.   $6,804 x 1,109 people (see # 4 above) = $7.546 million.
EMPLOYMENT-RELATED BENEFIT FROM OWNING A CAR – INCREASE IN PAY
About $2.6 million of the $30-million borrower return was associated with borrowers who got an
increase in pay. The approximately $2.6-million benefit was calculated in the following manner:
     1. 8.77 percent of surveyed borrowers defaulted on their loans. That leaves 91.23 percent,
        or 4,353 borrowers, who did not default on their loans.
     2. 39 percent of the borrowers surveyed received a wage increase since buying a car with
        the Ways to Work loan.
     3. Applying this 39 percent against the 4,353 borrowers in the 2007 to 2010 timeframe, we
        estimate that 1,698 borrowers received a pay increase.
     4. Multiplying these 1,698 borrowers x the average wage increase of 8.2 percent per the
        survey results x $9.45 per hour x 2,000 hours per year, we get $2.631 million.
BENEFIT FROM AVOIDANCE OF PAYDAY LOANS
$420,000 was the approximate projected cost avoidance of not using payday loans. That
number was calculated in the following way:




13
   Nobscot Corporation. (n.d.) US Annual employee total separation rates by industry and by geographic region
through Aug/06. Retrieved September 1, 2011, from http://www.nobscot.com/survey/us_total_separations_0806.cfm.

December 2011                                                                                                  59
                                                             Ways to Work 2011 Return on Investment Study

    1. 24 percent of the survey respondents said that they decreased the use of payday loans.
    2. Applying this percentage against the 4,771 number of borrowers, we get 1,145 as the
       projected number of borrowers that have decreased use of payday loans.
    3. Surveyed borrowers said that they used payday loans 2.74 times per year (on average).
    4. Average financing amount on a payday loan is $561 (payday loan pricing:
       http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp09-07.pdf).
    5. 24 percent x 1,145 borrowers x 2.74 times per year x $561 = $422,421.

BENEFIT FROM AVOIDANCE OF CHECK CASHERS
Cost avoidance by not using check cashers was approximately $780,000, calculated in the
following way:

    1. 13.63 percent of survey respondents said that they now have access to free checking.
    2. 13.63 [percent of the 4,771 = 651 = the total projected number of borrowers that have
       opened a checking account since becoming a Ways to Work borrower.
    3. The annual cost of being ―unbanked‖ is $1,200
       http://www.stlouisfed.org/publications/cb/articles/?id=2039.
    4. 651 x $1,200 = $780,709.

BENEFITS FROM INCREASED ACCESS TO CREDIT
Borrower benefits accruing from increased access to credit has two components totaling
approximately $18.6 million. First is the direct access to additional loans, which contributes
about $13.7 million. The second is increased earnings due to taking out a student loan, which
contributes another $4.9 million. Here is how those two figures were calculated, starting with the
$13,700,000:

    1. Total number of borrowers = 4,771.
    2. 23 percent of borrowers said they accessed additional credit.
    3. 23 percent of 4,771 = 1,097 borrowers.
    4. The average loan amount = $12,507.
    5. Increased access to credit = 1,097 borrowers x $12,507 = $13,724.306.
The additional $4.9 million was calculated in the following manner:
    6. 20 percent of the 23 percent who accessed additional credit did so by taking out a
       student loan for advanced education (beyond high school).
    7. 20 percent x 23 percent x 4,771 = 219.47 who have some post-secondary education.
    8. A study (The High Cost of High School Dropouts – What the Nation Pays for Inadequate
       High Schools; Alliance for Excellent Education, Issue Brief, October 2007) has shown
       that those who have at least some postsecondary education increase lifetime income tax
       by an NPV of $225,000.
    9. Assuming a 20-percent combined federal and state tax rate, this suggests NPV income
       of $1.125 million over a lifetime, or $900,000 net earnings.

December 2011                                                                                          60
                                                               Ways to Work 2011 Return on Investment Study


    10. $900,000 net earnings x 219.47 who pursued higher education with a student loan
        subsequent to getting a Ways to Work loan = $197,523,000.
    11. $197,523,000 over a 40-year career = $4,938,075 additional earnings per year.
4.2.2. Employers
From an ROI perspective, the benefits that Ways to Work provides to its borrowers also extend
to those with whom those borrowers are employed in two important respects:
        Lower employee turnover. Employers incur costs when it has to replace an employee,
        whether or not they are terminated by the employer or by the employee.
        Reduce absenteeism and lateness. Employers also incur costs when employees either
        miss work (e.g., due to transportation issues) or are required to arrive late or leave early
        in order to make certain appointments (e.g., school meetings for their children, doctor’s
        appointments).
As described in the following sections, the estimated savings to employers attributable to the
Ways to Work program between 2007 and 2010 was approximately $9.3 million.
BENEFITS DUE TO REDUCED TURNOVER
Employers avoided about $3.9 million in outreach, hiring, and retraining costs that would
otherwise have been expended if not for reduced turnover due to the Ways to Work car loans.
Here is how that figure was calculated:
    1. 93 percent of respondents indicated that having the Ways to Work car was ―very helpful‖
       for keeping their job. 93 percent of the 4,771 borrowers = 4,437 borrowers who would
       not otherwise have a car.
    2. 8.77 percent of Ways to Work borrowers defaulted; applying this default rate to the 4,437
       = 4,048 borrowers who we consider successful borrowers, who attribute their ability to
       keep their job to the Ways to Work car.
    3. The next piece of analysis was to compare the job retention rate of Ways to Work
       borrowers with national data on the annual separation rate. The estimated annual
       separation rate is about 40.4 percent, as compared to only 13 percent among Ways to
       Work borrowers surveyed. This 27.4 percent differential (40 percent less 13 percent)
       was then applied to the 4,048 Ways to Work borrowers, which yields about 1,119
       individuals who would otherwise have lost their job ―but for‖ the Ways to Work program.
    4. The cost of replacing an entry level employee is about $3,500.
    5. 1,119 individuals who would otherwise have lost their jobs x the cost of $3,500 per
       employee = an annual employers’ cost of approximately $3.9 million.
BENEFITS DUE TO REDUCED ABSENTEEISM AND LATENESS
The other area of cost savings for employers is the reduced amount of absenteeism associated
with Ways to Work borrowers’ access to a car. The value of that cost avoided is about $5.4
million, calculated per the following:
    1. 48% percent of Ways to Work borrowers said fewer days missed at work was ―very
       much‖ a result of having a car, and 52 percent said reduced lateness (arriving late,
       leaving early) was ―very much‖ a result of having a car. Therefore, an estimated 2,177
       Ways to Work borrowers (50% percent of the 4,353 successful borrowers that would

December 2011                                                                                            61
                                                                        Ways to Work 2011 Return on Investment Study

        otherwise not had access to a car) would have incurred lateness/absenteeism due to
        lack of a car.
     2. Survey respondents reported an average of 2.5 days missed per month due to not
        having a car. 2.5 days x 12 months x 2,177 borrowers who otherwise would have been
        absent due to not having a car = an annual reduction of 65,310 days of absence from
        work avoided, which = 522,480 hours per year.
     3. Lateness was estimated by respondents at 2.2 hours per month x 12 months = 26.4
        hours per year x 2,177 borrowers = 57,473 hours of lateness per year.
     4. Adding the absentee hours of 522,480 to the 57,473 hours of lateness equals 579,953
        total hours of work missed. Valued at the average wage of $9.45 per hour is
        approximately $5.4 million.
4.2.3. Taxpayers
The ROI to taxpayers as a stakeholder refers a combination of:
        Projected increases in income tax revenues associated with improved Ways to Work job
        retention and earnings levels (e.g., due to promotions).
        Projected increases in sales tax revenues from Ways to Work borrowers’ increased
        access to credit (i.e., through additional loans subsequent to original car loan).
        Decreased costs due to reductions in enrollments in various public programs (e.g.,
        TANF, WIC, SNAP).
As described in the following sections, the estimated benefits attributable to the Ways to Work
program from 2007 to 2010 from these three effects is approximately $18 million.
INCREASED REVENUE FROM PAYROLL AND INCOME TAX – KEPT A JOB
The projected tax benefit of approximately $1.5 million is estimated by:
     1. Multiplying the average wage of $9.45 per hour x 40 hours per week x 18 weeks that it
        takes an individual to become re-employed14 = $6,804 in lost income.
     2. Based on 15 percent federal tax and a 5 percent state income tax, about 20 percent of
        $6,804, or $1,361 per person, would have been lost during the 18 weeks.
     3. Multiplied by the 1,119 individuals that did not lose their job through the benefits of a car
        obtained through Ways to Work prevents a $1,509,000 loss in income tax revenues.
INCREASED REVENUE FROM PAYROLL AND INCOME TAX – INCREASE IN PAY
The projected additional income tax revenue of approximately $526,000 was derived per the
following:
     1. 39 percent received a wage increase since their Ways to Work loan was closed.
     2. 39 percent x the 4,353 successful borrowers = 1,698 borrowers who have experienced a
        pay increase.


14
   U.S. Department of Labor, Bureau of Labor Statistics. (2011). Figure 1. Share of the unemployed who found jobs
by weeks of duration of unemployment, annual averages, 1994–2010 (Percent distribution). How long before the
unemployed find jobs or quit looking? Retrieved from
http://www.bls.gov/opub/ils/summary_11_01/unemployed_jobs_quit.htm#table1.

December 2011                                                                                                       62
                                                             Ways to Work 2011 Return on Investment Study

    3. 1,698 borrowers x the average pay increase of 8.2 percent x the average hourly wage of
       $9.45 x 2,000 hours per year yields $2,631,560 in increased wages.
    4. Using the 20-percent combined state and federal income tax rate x $2,631,560 in
       increased earnings = $526,159 in additional income tax revenues.
INCREASED SALES AND INCOME TAX REVENUES FROM INCREASED ACCESS TO CREDIT
According to this model, total tax revenues are projected to increase by about $2.6 million, per
the following explanation:
    1. An estimated 23 percent, or 1,097 of the 4,771 Ways to Work borrowers, between 2007
       and 2010 obtained an additional loan or access to credit after their initial Ways to Work
       auto loan.
    2. The estimated average additional loan or credit amount is $12,507.
    3. 1,097 borrowers x $12,507 additional credit = $13,720,179 in access to credit for Ways
       to Work borrowers over the past four years.
    4. Assuming that 90 percent of these loans and access to credit is spent on taxable items,
       and further assuming an average 6.8 percent state sales tax rate, then $13,720,179 x 90
       percent x 6.8 percent = $839,675 in state tax revenue gained.
    5. In regard to income tax, we can tax new income that will be generated from the
        $13,720,179 in additional credit usage. Running a scenario in a regional macro-
        economic model shows about $1 million in income generated for each $5 million in
        spending. At that ratio, $13,720,179 in additional spending would yield $2,744,036 in
        taxable income. Applying 15 percent federal income tax and 5 percent state income tax
        would yield $548,807 in additional income taxes.
    6. We have shown previously in ―Benefits from Increased Access to Credit‖ that the
       aggregate annual earnings from having gone to college is $4,938,075. Assuming a
       combined federal and state income tax rate of 20 percent yields = $987,615 in increased
       income tax.
    7. The combined total would be $839,675 in state sales tax revenue and $548,807 in
       combined federal and state income tax revenue, plus $987,615 in increased income tax
       for a total of $2,376,097 in tax revenue.
SAVINGS FROM REDUCED RELIANCE ON PUBLIC ASSISTANCE
The largest source of taxpayer cost benefits from this ROI analysis relates to the impact that
Ways to Work participation has on enrollment in a variety of public assistance programs. The
savings to taxpayers is based on a comparison of the percentage of Ways to Work borrowers
enrolled in each program before and after participation in the program. We compared this
difference with what Ways to Work borrowers’ participation in public assistance would have
been, based on the overall national trends.

For example, 32.4 percent of Ways to Work borrowers surveyed were enrolled in the WIC
program (the Special Supplemental Nutrition Program for Women, Infants and Children) prior to
receiving their loan, but only 16.2 percent were enrolled after Ways to Work participation.
Overall, WIC enrollment from 2007 to 2010 increased by 11 percent, which would produce a
projected 36 percent of Ways to Work borrowers, absent participation in the Ways to Work
program. The 19.8 percent difference between the projected and actual percentage of WIC
enrollees (36 percent less 16.2 percent) was then multiplied by the number of Ways to Work

December 2011                                                                                          63
                                                                        Ways to Work 2011 Return on Investment Study

participants served from 2007 to 2010, to project 943 families that would otherwise be receiving
WIC services. At an average annual cost of $3,562 per family (with 1.9 children15), the estimated
reduction in WIC costs is $3.358 million.

The total projected savings in reduced enrollment in public assistance is approximately $13.8
million (see Figure 4-2 for the breakout by public assistance program).

4.2.4. Local Lenders
One study suggests that each new customer represents (on average) additional income of
$144. This number does not include potential cross-selling of services, which may be even more
likely in the case of Ways to Work borrowers who do not have a relationship with any other
banker. $144 x 14 percent who open checking accounts x 4,771 borrowers = $93,685.

4.2.5. Ways to Work – Aggregated
The combined total benefit to all stakeholder audiences was approximately $57.7 million for
loans made to 4,771 borrowers during the 2007 to 2010 timeframe. Total project costs to
administer the Ways to Work program for this same time period was about $23.2 million. This
leads to an estimate of $2.48 in benefits being returned for every $1 invested in the Ways to
Work program.




15
     The 1.9 children per household figure is based on responses from the 2011 Ways to Work Borrower Survey.

December 2011                                                                                                     64
Appendices
                                                Ways to Work 2011 Evaluation Appendix A




                Appendix A: Propensity Score Matching Details




December 2011                                                                        65
                                                                 Ways to Work 2011 Evaluation Appendix A

Appendix A: Propensity Score Matching Details
For constructing the comparison group, we took the following matching criteria into
consideration. First, the comparison group was drawn from eight states that had the largest
number of approved Ways to Work borrowers between December and February of 2006-2007,
2007-2008, and 2008-2009. Within each state, we matched non-Ways to Work cases to Ways
to Work non-defaulters on a TransUnion Auto Model credit score below 540. What determined
that specific range of credit scores was the examination of 2007 credit scores of the sample of
Ways to Work non-defaulters. On average, their TransUnion Auto Model credit score was 487
with a standard deviation of 52. Approximately 70 percent of the borrowers failed in the 435 to
539 interval, one standard deviation below the mean to one standard deviation above the mean.
The next matching criterion was to closely match non-defaulters to non-Ways to Work cases on
VantageScore. Non-defaulters were also closely matched on year of birth, and exactly matched
on gender.

To summarize, Ways to Work non-defaulters were matched on the following variables:

        Residents of specific zip codes in LA, MN, NY, OH, OR, PA, VA, WI
        TransUnion Auto Model credit score between 435 and 539
        VantageScore credit score
        Year of birth
        Gender

Finally, the matching procedure required that non-defaulters and non-Ways to Work participants
have complete TransUnion Auto Model and VantageScore credit data in 2007, 2009, and 2011.

We conducted the matching of non-defaulters and comparison participants using a precise
algorithm applied through a computer-based macro, called ―matchit,‖ written by Ho, Imai, King,
and Stuart (2004, 2007), following the work of Rosenbaum and Rubin (1983). The default
nearest neighbor matching method in ―matchit‖ was ―greedy‖ matching, where the closest
control match for each treated unit was chosen one at a time. Specifically, a 1-to-1 nearest
neighbor match on a logistic-regression based propensity score within caliper restrictions was
followed. The procedure chose one control case (in this situation, a non-Ways to Work
borrower) that was closest to the treated case on a ―distance‖ measure without replacement (by
default, it is the logit). The number of standard deviations of the distance measure within which
to draw control cases was set to 0.25.

Tables A1, A2, and A3 summarize the characteristics of the resulted matched groups on all
proposed matching variables. Variables that are italicized were subject to exact matching. The
balance results indicated that in the resulting matches, there were no systematic or significant
(mean) differences between the matched pairs of Ways to Work and non-Ways to Work
participants on the majority of the key matching variables, with the exception of the 2007
VantageScore for the Group 6 matched cases and the age variable for the Group 8 matched
cases. We adjusted for those differences in the related ANCOVA models.




December 2011                                                                                         66
                                                                       Ways to Work 2011 Evaluation Appendix A

                 Figure A1. Summary of Balance Statistics for Group 6 Matched Cases

                                 Group 6 Ways to Work   Non-Ways to Work
                                                                                     Standard Mean
      Matching Variables          Borrowers Average     Borrowers Average
                                                                                       Difference
                                        (n=61)                (n=61)
    2007 TransUnion Auto
                                            474               472                          0.04
    Model credit score
    2007 VantageScore                       537               530                          0.39
    Age                                  40 years           39 years                       0.24
    Female                                 84%                84%                         0.000
    Male                                   16%                16%                         0.000
    NY                                      2%                 2%                         0.000
    PA                                     20%                20%                         0.000
    MN                                     21%                21%                         0.000
    LA                                     18%                18%                         0.000
    OH                                     20%                20%                         0.000
    VA                                      7%                 7%                         0.000
    WI                                     10%                10%                         0.000
    OR                                      3%                 3%                         0.000
   Source: 2011 TransUnion data, GreenLight data



                 Figure A2. Summary of Balance Statistics for Group 7 Matched Cases

                                 Group 7 Ways to Work   Non-Ways to Work
                                                                                     Standard Mean
      Matching Variables          Borrowers Average     Borrowers Average
                                                                                       Difference
                                        (n=60)                (n=60)
    2007 TransUnion Auto
                                            470               473                          0.06
    Model credit score
    2007 VantageScore                       531               526                          0.25
    Age                                  38 years           38 years                       0.02
    Female                                 73%                73%                         0.000
    Male                                   27%                27%                         0.000
    NY                                      8%                 8%                         0.000
    PA                                     33%                33%                         0.000
    MN                                     15%                15%                         0.000
    LA                                     10%                10%                         0.000
    OH                                     10%                10%                         0.000
    VA                                      8%                 8%                         0.000
    WI                                     10%                10%                         0.000
    OR                                      5%                 5%                         0.000
   Source: 2011 TransUnion data, GreenLight data




December 2011                                                                                               67
                                                                       Ways to Work 2011 Evaluation Appendix A



                 Figure A3. Summary of Balance Statistics for Group 8 Matched Cases

                                 Group 8 Ways to Work   Non-Ways to Work
                                                                                     Standard Mean
      Matching Variables          Borrowers Average     Borrowers Average
                                                                                       Difference
                                        (n=62)                (n=62)
    2009 TransUnion Auto
                                            466               467                          0.02
    Model credit score
    2009 VantageScore                       538               537                          0.01
    Age                                  36 years           34 years                       0.39
    Female                                 82%                82%                         0.000
    Male                                   18%                18%                         0.000
    NY                                     15%                15%                         0.000
    PA                                     23%                23%                         0.000
    MN                                     13%                13%                         0.000
    LA                                      3%                 3%                         0.000
    OH                                      6%                 6%                         0.000
    VA                                     11%                11%                         0.000
    WI                                     23%                23%                         0.000
    OR                                      6%                 6%                         0.000
   Source: 2011 TransUnion data, GreenLight data




December 2011                                                                                               68
                                             Ways to Work 2011 Evaluation Appendix B




                Appendix B: ROI Methodology and Citations




December 2011                                                                     69
                                                                                   Ways to Work 2011 Evaluation Appendix B

      Appendix B: ROI Methodology and Citations

                                  Figure B1. Assumptions on Program Effectiveness

Reference                  Assumption                                 Citation                      Role in ROI Calculation
I-A          Ways to Work has served 4,771 borrowers      Ways to Work National Office         This number represents the total
             between 2007 and 2010.                       database, August 2011                number of Ways to Work
                                                                                               borrowers served between 2007
                                                                                               and 2010.
I-B          The average default rate on Ways to Work     Ways to Work National Office         This number represents the
             loans between 2007 and 2010 was 8.77         database, August 2011                number of Ways to Work loans
             percent.                                                                          that went into default between
                                                                                               2007 and 2010.
I-C          There were 4,353 successful borrowers in     Ways to Work National Office         This represents the number of
             the Ways to Work program between 2007        database, August 2011                borrowers for whom the benefits
             and 2010 (4,771 borrowers, less 8.77                                              of a car obtained through Ways
             percent).                                                                         to Work are calculated.
I-D          The average amount of time since             Ways to Work National Office         This figure allows us to calculate
             obtaining a Ways to Work loan from           database, August 2011                the total benefits from the Ways
             borrowers is 2.62 years (based on the                                             to Work program for borrowers
             number of borrowers served each year                                              served between 2007 and 2010.
             from 2007 to 2010).

I-E          The average cost per borrower served by      The national office operating        This represents the investment
             Ways to Work between 2007 and 2010           budget figure is from the Ways to    cost for Ways to Work to operate
             was $1,413 (total costs of $6,741,423        Work Income Audit Statement.         the program.
             divided by 4,771 participants).              The local site operating budget
                                                          figure is from a proposal from the
                                                          national office to the Wal-Mart
                                                          Foundation. The number of
                                                          participants is from the Ways to
                                                          Work national office database.
II           Ways to Work participants earned an          2011 Ways to Work Borrower           Median salary = $20,794, which
             average hourly wage of $9.45. This is        Survey                               equals $10.00 per hour.
             based on the average annualized gross
             salary of Ways to Work participants of
             $18,901 divided by an estimated 2,000
             hours of work per year.
III          39 percent of Ways to Work borrowers         2011 Ways to Work Borrower           In conjunction with Reference V,
             surveyed indicated they had received a       Survey                               used to determine the average
             raise.                                                                            wage increase reported by Ways
                                                                                               to Work borrowers.
IV           93 percent of Ways to Work participants      2011 Ways to Work Borrower           This value is used to determine
             indicated that obtaining a car was ―very     Survey                               the impact of the Ways to Work
             helpful‖ in helping them keep the job they                                        program on job retention for its
             already had.                                                                      borrowers.
V            39 percent of Ways to Work respondents       2011 Ways to Work Borrower           This value is used to determine
             received an estimated 12.33 percent          Survey                               the value generated from Ways
             increase in wages.                                                                to Work participants improving
                                                                                               their earnings level.




      December 2011                                                                                                      70
                                                                                      Ways to Work 2011 Evaluation Appendix B

                                      Figure B2. Assumptions on Costs and Benefits

Reference                    Assumption                                   Citation                      Role in ROI Calculation
VI           Projected annual turnover rate in the           Employee Turnover Rates - Total       This value is used to calculate
             United States is about 40.4 percent.            Separations by Government             the impact of Ways to Work car
                                                             (Sep/05 - Aug/06)                     acquisition in terms of improved
                                                             http://www.nobscot.com/survey/us      job retention.
                                                             _total_separations_0806.cfm
VII          It takes an average of 18 weeks to get          Share of the unemployed who           This figure is used to measure
             another job (i.e., for re-employment).          found jobs by weeks of duration of    the time unemployed as a result
                                                             unemployment, annual averages,        of the loss of a job.
                                                             1994–2010
                                                             http://www.bls.gov/opub/ils/summ
                                                             ary_11_01/unemployed_jobs_quit.
                                                             htm#table1
VIII         A Ways to Work participant would lose, on       Calculation of weekly earnings of     This value is used to calculate
             average, about $6,804 in wages in the           low-wage workers ($9.45) times        loss of individual earnings and
             interval between jobs.                          18 weeks estimated time to find       loss of income tax revenues in
                                                             another job.                          the average time it takes to
                                                                                                   become re-employed.
IX           There is an average loss in combined state      Calculation of income not earned      This value is used to estimate
             and federal income tax revenues of $1,361       times 20-percent income tax rate      the loss in tax revenues resulting
             per person for the time it takes to become      (15 percent federal, 5 percent        from the loss of a job and the
             re-employed.                                    state/local).                         time it takes for re-employment.
X            The Society for Human Resource                  Employee Retention: What              This value is used to estimate
             Management (SHRM) estimated that it             Employee Turnover Really Costs        the cost of employee turnover.
             costs $3,500 to replace one $8.00 per hour      Your Company
             employee when all costs (e.g., recruiting,      http://www.webpronews.com/empl
             interviewing, hiring, training, reduced         oyee-retention-what-employee-
             productivity) are considered.                   turnover-really-costs-your-
                                                             company-2006-07
XI           About one quarter of jobs in low- and           Missed Opportunity: Transit and       This information equated the 25
             middle-skill jobs are accessible via transit    Jobs in Metropolitan America          percent access through transit as
             within 90 minutes for the typical               http://www.brookings.edu/reports/     a measure of access to
             metropolitan commuter.                          2011/0512_jobs_and_transit.aspx       new/better jobs. By comparison,
                                                                                                   81 percent of Ways to Work
                                                                                                   borrowers indicated the access
                                                                                                   to a car was very helpful in
                                                                                                   allowing them to get new/better
                                                                                                   jobs.
XII          Each individual gaining access to a new         Calculation of average weekly         This value is used to estimate
             better job (with an estimated 11 percent        earnings of Ways to Work              the additional individual earnings
             increase in earnings - see Reference III        participants ($9.45) times 11-        associated with greater access to
             above), produces $2,162 in additional           percent wage increase.                job opportunities. This value will
             annual income tax revenues.                                                           be updated from the new
                                                                                                   planned participant survey.
XIII         Each individual gaining access to a new         Calculation of incremental tax        This value is used to estimate
             better job (with an estimated 11-percent        revenues based on 20-percent tax      the additional tax revenues
             increase in earnings), produces $432 in         rate (15 percent federal, 5 percent   generated through increased
             increased income tax revenues.                  state/local).                         access to new/better jobs.
XIV          48 percent of Ways to Work borrowers said       2011 Ways to Work Borrower            This information is used to
             fewer days missed at work was very much         Survey                                measure the impact that access
             a result of having a car, and 52 percent                                              to a car contributes to the
             said reduced lateness (arriving late, leaving                                         decrease in lateness and days
             early) was very much a result of having a                                             absent from work. This value will
             car.                                                                                  be updated from the new
                                                                                                   planned participant survey.



       December 2011                                                                                                        71
                                                                                        Ways to Work 2011 Evaluation Appendix B

Reference                       Assumption                                 Citation                        Role in ROI Calculation
XV             Ways to Work borrowers had an average of        2011 Ways to Work Borrower            This information is used to
               1.3 fewer days absent from work and 1.4         Survey                                measure the impact on
               days less of lateness since owning a car.                                             employers of Ways to Work
                                                                                                     participants of reduced
                                                                                                     absenteeism and lateness to
                                                                                                     work.
XXI            24 percent of Ways to Work borrowers            2011 Ways to Work Borrower            This value is used to project the
               surveyed indicated that the Ways to Work        Survey                                number of Ways to Work
               loan was ―very much‖ a factor in reducing                                             borrowers that have reduced the
               the number of payday loans since Ways to                                              number of payday loans since
               Work participation.                                                                   Ways to Work.
XXII           The average annual reduction in payday          2011 Ways to Work Borrower            This value is used to calculate
               loans for these 24 percent of Ways to Work      Survey                                the reduced number of payday
               borrowers was 2.74.                                                                   loans among Ways to Work
                                                                                                     participants as a result of the
                                                                                                     program.
XXIII          The average principle on a payday loan is       Payday Loan Pricing                   This value is used to estimate
               $314, with initial finance charge of $55, 17-   http://www.kansascityfed.org/PUB      the interest charges associated
               day initial term, and an effective APR of       LICAT/RESWKPAP/PDF/rwp09-             with a payday loan.
               452 percent.                                    07.pdf
XXIV           The average number of days a borrower           Payday Loans, Inc.: Short on          This value is used to estimate
               remains indebted is 212.                        Credit, Long on Debt                  the interest charges associated
                                                               http://www.responsiblelending.org/    with a payday loan.
                                                               payday-lending/research-
                                                               analysis/payday-loan-inc.pdf
XXV            Total interest charges on average for           Calculations based on References      This value is used to estimate
               payday loans are $561.                          XXIII and XXIV                        the interest charges associated
                                                               http://www.online-                    with a payday loan.
                                                               calculators.co.uk/interest/compou
                                                               ndinterest.php


XXVI           14 percent of borrowers now have                2011 Ways to Work Borrower            This value is used to project the
               checking accounts (access to free/low-cost      Survey                                number of Ways to Work
               check cashing) as a result of participating                                           participants that now have
               in the Ways to Work program.                                                          checking accounts as a result of
                                                                                                     participation in the program.


XXVII          The annual cost of being unbanked is            Reaching the Unbanked and             This calculation is used to
               $1,200 (cashing a bi-weekly payroll check       Underbanked                           estimate the average annual
               and buying about six money orders each          http://www.stlouisfed.org/publicati   costs associated with being
               month, a household with a net income of         ons/cb/articles/?id=2039              ―unbanked.‖
               $20,000 may pay as much as $1,200
               annually for alternative service fees).

XXVIII         The cost to cash a check at a bank where        More banks are yanking free           This calculation is used to
               you have a checking account is $0.              checking                              estimate the average annual
                                                               http://www.bankrate.com/finance/c     costs associated with being
                                                               hecking/more-banks-are-yanking-       ―unbanked.‖
                                                               free-checking-1.aspx
XXIX           100 of 430 borrowers surveyed (23               2011 Ways to Work Borrower            This value is used to estimate
               percent) indicated that they had obtained       Survey                                the number of borrowers gaining
               an additional loan since the Ways to Work                                             additional access to capital (i.e.,
               loan.                                                                                 via additional loans) subsequent
                                                                                                     to their participation in Ways to
                                                                                                     Work.




         December 2011                                                                                                         72
                                                                                       Ways to Work 2011 Evaluation Appendix B

Reference                      Assumption                                 Citation                       Role in ROI Calculation
XXX            The average amount of loans obtained by        Data generated by TransUnion on       The increased access to capital
               Ways to Work participants after the original   Ways to Work borrowers, August        through these additional loans
               car loan is $12,507.                           2011.                                 represents benefits to the
                                                                                                    borrowers and also provides for
                                                                                                    additional tax revenues (to be
                                                                                                    determined).


XXXI           The average sales tax across the nation is     The Sales Tax Clearinghouse           This value is used to estimate
               6.8 percent, including all regional, county,   Frequently Asked Questions            the tax effect of the increased
               and city taxes. This model assumes the         https://thestc.com/FAQ.stm            capital results from these
               additional capital generated through these                                           additional loans.
               loans go towards taxable purchases.



XXXII          Each new banking customer represents           Lifetime Value of Checking            This value is used to estimate
               additional income of $144.                     Account Customers                     the value of new Ways to Work
                                                              http://mycommunity.leveragesoftw      customers to banks.
                                                              are.com/group_discussion.aspx?d
                                                              iscussionid=54a78c2511dc415dbf
                                                              2decb0bdb6b0f7


XXXIII         Ways to Work borrowers’ participation          2011 Ways to Work Borrower            This value is used to estimate
               rates in some federally funded public          Survey                                the net number of borrowers that
               support programs decreased before and                                                were able to leave public
               after participation in the program (e.g.,                                            assistance, comprising a savings
               TANF, WIC), but increased in others (e.g.,                                           to taxpayers, as a result of
               Medicaid, School Breakfast).                                                         getting a loan through Ways to
                                                                                                    Work.

XXXIV          The federal, state, and local governments      The primary study is The              The total annual federal cost per
               spent $112 billion in fiscal year 2006 for     Taxpayer Costs of Divorce and         household for each item, times
               direct services for family fragmentation.      Unwed Childbearing: First-Ever        the number of households not
               The costs indicated in this report presents    Estimates for the Nation and All      supported through public
               the costs for the justice system, income       Fifty States; Benjamin Scafidi,       programs, times the estimated
               support, nutrition, health, social services,   Georgia College & State               number of years each benefit is
               and housing.                                   University. Certain cost categories   provided.
                                                              reference The One Hundred
                                                              Billion Dollar Man -- The Annual
                                                              Costs of Father Absence; Steve L.
                                                              Nock, University of Virginia,
                                                              Christopher Einholf, DePaul
                                                              University School of Public
                                                              Service
XXXV           Between December 2007 and March 2010,          Welfare Reform at Age 15: A           This value is used to compare to
               TANF enrollment increased by 12 percent.       Vanishing Safety Net for Women        caseload trends among Ways to
                                                              and Children                          Work borrowers.
                                                              http://www.legalmomentum.org/ou
                                                              r-work/women-and-
                                                              poverty/resources--
                                                              publications/welfare-reform-15.pdf
XXXVI          Overall, the number of taxpayers receiving     How Well Did the EITC Work            This value is used to compare to
               the EITC nationally increased by 350,000       During the Recession?                 caseload trends among Ways to
               filers between 2007 and 2008 to 24.1           http://www.tnr.com/blog/the-          Work borrowers.
               million--a bump of 1.5 percent.                avenue/92736/how-well-did-the-
                                                              eitc-work-during-the-recession


         December 2011                                                                                                       73
                                                                                    Ways to Work 2011 Evaluation Appendix B

Reference                    Assumption                                    Citation                   Role in ROI Calculation
XXXVII        There was a 10-percent increase in SSI        Program Statistics and Data Files    This value is used to compare to
              enrollments between July 2007 and June        by Release Date                      caseload trends among Ways to
              2011.                                         http://www.ssa.gov/policy/data_da    Work borrowers.
                                                            te.html
XXXVIII       There was a 10-percent average increase       National and State Program Data      This value is used to compare to
              in School Breakfast and Lunch enrollments     http://frac.org/reports-and-         caseload trends among Ways to
              between July 2007 and June 2011.              resources/reports-2/                 Work borrowers.
XXXIX         There was an 11-percent increase in WIC       National and State Program Data      This value is used to compare to
              enrollments between 2007 and 2010.            http://frac.org/reports-and-         caseload trends among Ways to
                                                            resources/reports-2/                 Work borrowers.
XL            Medicaid enrollment grew by 17.8 percent      Medicaid Enrollment: June 2010       This value is used to compare to
              between December 2007 and June 2010.          Data Snapshot                        caseload trends among Ways to
                                                            http://www.kff.org/medicaid/enroll   Work borrowers.
                                                            mentreports.cfm
XLI           SCHIP enrollment increased by 7 percent       CHIP Enrollment Reports              This value is used to compare to
              between 2007 and 2009.                        http://www.cms.gov/NationalCHIP      caseload trends among Ways to
                                                            Policy/CHIPER/list.asp               Work borrowers.
XLII          Head Start enrollment increased 3 percent,    2007 and 2010 State Preschool        This value is used to compare to
              from 1,677,611 in 2007 to 1,725,086 in        Yearbooks                            caseload trends among Ways to
              2010.                                         http://nieer.org/docs/index.php?Do   Work borrowers.
                                                            cID=131
XLIII         Nationwide, from the winter of 2006/2007      Household Reports of Energy          This value is used to compare to
              to the winter of 2009/2010, there was a 48-   Assistance Receipt Increased 48      caseload trends among Ways to
              percent increase in households reporting      Percent During Recession             Work borrowers.
              energy assistance receipt.                    http://www.carseyinstitute.unh.edu
                                                            /publications/IB-Bean-LIHEAP.pdf

XLIV          Food Stamp enrollment increased by 48         Welfare Reform at Age 15:            This value is used to compare to
              percent between December 2007 and             A Vanishing Safety Net for           caseload trends among Ways to
              March 2010.                                   Women and Children                   Work borrowers.
                                                            http://www.legalmomentum.org/ou
                                                            r-work/women-and-
                                                            poverty/resources--
                                                            publications/welfare-reform-15.pdf
XLV           No national enrollment trend data are
              currently available for Child Welfare
              Services and Housing Assistance.




        December 2011                                                                                                    74
                                        Ways to Work 2011 Evaluation Appendix C




                Appendix C: Borrower Profiles




December 2011                                                                75
                                                                  2011 Ways to Work Evaluation Appendix C

Appendix C: Borrower Profiles
The seven borrower profiles here come from telephone interviews conducted with surveyed
borrowers in August 2011. They represent a range of experiences with the Ways to Work
program.

Borrower A
Canton, OH

Borrower A is a divorced, single mother of two sons, ages 14 and 20. Before she got her Ways
to Work vehicle, she worked odd jobs in temporary services without a clear career path and had
to rely on rides from friends and family to get around. During this time, Borrower A was looking
for more stable employment opportunities so that she could better support herself and her
children.

Three years ago, Borrower A found the stability she was looking for in the form of a job as a
home health aide, a job which her Ways to Work car helped her get and keep. ―My job depends
on me to have a vehicle. I have several clients a day that I help…My vehicle is utmost when it
comes to my job. If I don‟t have a vehicle running, I don‟t have a job.”

Beyond the convenience of having her own vehicle, Borrower A also found Ways to Work’s
financial education classes to be helpful. She particularly found classes on budgeting useful:
―Because my job fluctuates from month to month, it was very helpful to see where my money
goes and what bills I have. [Since] the money coming in fluctuates, I have to fluctuate what goes
out as well.”

Despite her success at finding more stable employment and the financial management lessons
she learned at Ways to Work, Borrower A still finds that it can be ―a struggle just to provide from
day to day.” Nevertheless, she wants to be able to go back to school eventually and has hopes
for the future.

“There is help out there. I know a lot of people are very deterred right now with the government
and the country and whatnot; sometimes you just hit a brick wall. I think Ways to Work was at
least a window of opportunity for getting on my feet and being able to prosper for me and my
sons.”

Borrower B
Lynchburg, VA

Borrower B is a 39-year-old African American mother of two. Getting a Ways to Work car loan
one year ago changed her and her family’s life. Before Ways to Work, Borrower B and her
family were driving a faulty car that would break down often. Reflecting on that time Borrower B
says, “I hated having to rely on people to get rides to and from places and for my kids to have to
rely on other people.”

Borrower B used her Ways to Work loan to purchase a Chrysler LHS and has had a wonderful
experience with the car. The car has proven to be a reliable vehicle that Borrower B and her
husband use to get to and from work, school, and family activities. ―My son plays football. I get
to go to his games and pick him up from practices…my daughter, she babysits, so I get to take
her to babysit.”

December 2011                                                                                          76
                                                                  2011 Ways to Work Evaluation Appendix C


The car also helps Borrower B get to work earlier and has helped her husband attend school
where he is studying for a business management degree. Borrower B says that her experience
with Ways to Work has helped her learn how to stick to a budget and how to better manage her
time and money. The most important aspect of Ways to Work for Borrower B and her family:
“Having a vehicle we can trust.”

“There are places that will help people who do not have good credit and they‟re trying to start
over. There [are] places out there for you; you just have to look around. I looked around and I
found Ways to Work.”

Borrower C
Madison Heights, VA

Borrower C is a 47-year-old African American mother of five. She lives with her son and two of
her adult children. Borrower C took out a Ways to Work loan in 2007 and used the loan to
purchase a 1997 Saturn SL2, a car she still drives today. Because Borrower C lives in a rural
part of Virginia, with very little public transportation, having a dependable vehicle is essential.
Before Borrower C took out her Ways to Work loan, she was driving a vehicle that would break
down often. At the time, she was working with a temp agency and, because of her faulty car,
was struggling to maintain full-time employment.

When Borrower C joined the Ways to Work program in 2007, she made a list of five goals for
herself that she wanted to accomplish once she got her new vehicle. They were:

    1.   To become gainfully and stably employed.
    2.   To get her son into a school that would be able to address his ADHD learning needs.
    3.   To become an independent, productive member of society.
    4.   To find a career.
    5.   To purchase her own home.

In the five years since Borrower C established these goals for herself, she has accomplished
every one of them, and she attributes a large part of her success to her Ways to Work vehicle:

“I knew it wasn‟t me….it‟s hard when you get turned down because they‟re looking at you like
you have a problem when you have an attendance issue. Well, that vehicle eliminated all of that
for me and enabled me to find a position that wasn‟t just a job; I ended up getting a career; that
was my fourth goal. It changed everything for me….I love that car; that car has enabled me to
reach all my goals. It helped me dream again.”

Borrower C credits the Ways to Work program with giving her more than just a dependable
vehicle; she says the program also gave her the tools she needed to succeed. “It‟s enabled me
to complete every one of my goals…When I‟m lost and I don‟t know something, I‟ll look at those
resources and just having those there makes a whole difference…when you learn the tools they
give you, you can apply it to everyday life.”

Once Borrower C got her Ways to Work car, she was able to make it in to work on time and her
temporary job doing data entry for a law firm transformed into a career as a paralegal working
on bankruptcy law. She’s been with the firm for five years and received four promotions. She’s


December 2011                                                                                          77
                                                                 2011 Ways to Work Evaluation Appendix C

taken what she learned in the Ways to Work program and applied it to buying her own home.
The program taught her how to create a monthly budget, to balance a checkbook, and to
understand her credit score. She says the program gave her the confidence to negotiate a good
interest rate when she applied for her mortgage loan, and she’s been passing these lessons on
to her children, teaching them how to create budget books and how to save.

“You know that program is not just a vehicle, in a way it‟s a support system. If you‟re looking for
help to address a certain issue that you don‟t know how to address, sometimes [the Ways to
Work program] might be your first resource. Ways to Work has helped me to get my self-esteem
back and become a productive, independent part of society. When you fall down on your luck
and you‟ve been through job to job, you lose a lot. It takes a toll on you. That vehicle did a 360
for me.”

Borrower D
Milwaukee, WI

Borrower D is a 33-year-old African American single mother of four. She is a social worker who
works with children’s services to support child safety. Borrower D received her Ways to Work
loan three years ago and is still driving the car she purchased with the loan. Having the Ways to
Work car has helped Borrower D in multiple areas of her life:

“I rely on my car as my primary source of transportation. Without the vehicle I wouldn‟t have
been able to get my kids back and forth to school, I wouldn‟t have been able to get back and
forth to work, and I even use my car at work sometimes. Without my vehicle I wouldn‟t have
been able to maintain my job, wouldn‟t have been able to [take care of] my children.”

Before Borrower D entered the Ways to Work program, she had $4,000 in debt. She set a
personal goal to manage her debt and to find a way to maintain a decent quality of life for her
and her children. Since participating in the Ways to Work program Borrower D has not only paid
off all of her previous debt, she has also paid off most of her car loan. Despite her success,
making payments on the car hasn’t always been easy for Borrower D. “I ran into the fact that I
went to a dealership and they may work with an inspector that they know to say that the car
checks out when the car didn‟t really check out. It caused me to fall behind in my payments
because I was left with a bill to pay for car repairs.” Oftentimes Borrower D had to finance these
repairs out of pocket, putting a strain on the household budget.

While Borrower D is very appreciative of the Ways to Work program, she doesn’t feel like she
received a lot of support in picking out the car. “That was something that I had to do on my
own…if the Ways to Work program were to contract with or familiarize themselves with dealers
in the area, and refer people to them as a source of good „quality‟ cars in the [Ways to Work
participants‟] price range, I think the program would excel drastically in that area.”

Overall however, Borrower D is very pleased with her Ways to Work experience and has even
recommended the program to several clients of hers. She says that the financial education and
training that she received as part of the Ways to Work program gave her helpful insights that
allowed her to reach her goals for managing her debt. “It was a hard road, but I‟m proud that I
was able to do it.”




December 2011                                                                                         78
                                                                  2011 Ways to Work Evaluation Appendix C

Borrower D hopes to work with the program again to either finance additional repairs to her
vehicle or to possibly purchase a new car. She is also planning on pursuing her Master’s in
Public Administration in the near future.

Borrower E
North Richland Hills, TX

Borrower E is a 39-year-old single mother raising a 15-year-old son. She works in a
management position at a local retail store. In fact, her boss at this store enabled her to get her
Ways to Work loan one year ago. Originally, she was not making enough money to qualify for
the loan, so her boss gave her enough of a pay bump to make her eligible. After she got her
Ways to Work car, this same boss gave her a promotion and significant pay raise to work in a
management position at a new branch of the store across town. It would have been impossible
for Borrower E to get this new position without a car.

The Ways to Work program has also helped Borrower E take control of her personal life again.
The biggest difference the program has made for her: “Self independence. Self-economy. Not
having to rely on friends or family to have to take me where [my son and I] need to go.” She also
mentions, “It helped me improve my credit. I didn‟t used to want a credit card because I didn‟t
know if I would have the money to pay it off each month.” The financial education courses that
Borrower E took through the Ways to Work program have changed that. She now understands
how to use online bill pay and how to use a credit card to build credit. She boasts, “I started off
with a credit card and they just upped my limit because I was able to make my payments.”

Without the financial education component, Borrower E might have been intimidated by the loan
process. Instead she found that her loan officer and the program gave her all the support she
needed to navigate her financial situation. “I could see someone getting easily overwhelmed
and not knowing what to do, but you have so many resources at your fingertips through Ways to
Work…it‟s a good tool for single moms who are just trying to learn, trying to get out there and be
financially secure.”

Borrower E is using what she has learned at Ways to Work to help her save money for
emergencies, save for retirement, and maybe even save to start her own small business. She
even teaches her son how to budget and save for things he wants by giving him a modest
allowance. In general, she says, “I pay more attention to what‟s going on financially, and at the
bank. Before I wouldn‟t really pay attention because I didn‟t have any money and I didn‟t want to
deal with bills. But now I‟ve built my credit back up and I‟m more on top of everything…I feel
more stable.”

Borrower E has recommended Ways to Work to other people, and is incredibly grateful for the
opportunities the program has provided her.

“I could not have gotten another job or been independent without this program. I‟m really happy
I was given a chance. You know it‟s not that I had bad credit on purpose, that I‟m irresponsible.
It was a bad situation, and not being able to get ahead as far as I needed to and now I‟m able
to. I just needed a little help, a little push, someone taking a chance on me.”




December 2011                                                                                          79
                                                                2011 Ways to Work Evaluation Appendix C

Borrower F
Lynchburg, VA

Borrower F is a 46-year-old Hispanic woman separated from her husband and living with her
two daughters, ages 21 and 12. Borrower F still drives her Ways to Work car to get to and from
her two jobs, and her eldest daughter uses the car to get to and from classes at the community
college and to her job at Nationwide.

Borrower F would not have been able to work as much as she does if it weren’t for the Ways to
Work car loan. She drives 35 to 40 minutes every day to get to and from her job at the hospital
and works at another job 10 minutes from her home to make extra money. Her Ways to Work
vehicle has given her “more flexibility to work more hours for the hospital.”

Borrower F remembers receiving financial counseling at Ways to Work, and she has learned
about the dangers of relying on credit, though she still has to use credit cards to make
purchases each month. ―My two jobs, they pay me once a month. And that is so hard you
know…and they send it by mail…I try to pay it off every month, I don‟t want to get stuck with a
big bill.‖ Borrower F and her eldest daughter sit down and decide on a budget for each month
and make paying their bills the first priority each month.

Borrower F has found the people at Ways to Work to be very helpful and she has been touched
by their dedication to her and her family. She remembers when she was applying for the
program that the staff were very helpful in showing her how to apply, and helping her overcome
language barriers in the application process. Beyond these things though, the staff truly cares
about Borrower F and her family. “They just sent me college materials for my daughter, and they
are helping me with that…They call me sometimes, they want to know how I am doing, how‟s
the car, how‟s the family doing.”

“I want single mothers and families to know that they can get a benefit from this program…I
appreciate the Ways to Work program, it helped me a lot in my life and I want to say thank you.”

Borrower G
Omaha, NE

Borrower G is a single African American mother of two grown children. Borrower G is no longer
driving the car that she bought with her Ways to Work loan because it broke down less than two
years after she bought it. She is currently saving to purchase a new vehicle outside of the Ways
to Work program, but this has been difficult since interest rates are much higher for the type of
car loans she is trying to get.

Borrower G says that it would have been helpful if Ways to Work had recommended places
during the car buying process. ―When you sign the vehicle, they should go over it with a
mechanic. I didn‟t have extra money to get someone to do that.‖ She says she wishes she had
―someone else there [to do] a once over inspection.‖




December 2011                                                                                        80
                                                               2011 Ways to Work Evaluation Appendix C

Despite Borrower G’s issues with her car, she did learn some valuable lessons from the Ways
to Work program about money management. ―I was raised if you don‟t spend it, someone else
will.‖ Ways to Work taught Borrower G ―that you should always pay your bills on time to avoid
late fees. That you should always have a plan, [and that you should] think about what you do
before you do it… don‟t make new purchases that are unnecessary.‖

The most important aspect of the Ways to Work program for Borrower G: ―It helped me to get
back on both my feet…[I‟m] trying to manage my money better. Make better purchases, [and]
ask the right questions.‖




December 2011                                                                                       81
                                                                 2011 Ways to Work Evaluation Appendix D



                                         APPENDIX D



WAY S TO W OR K B AC KGR OU N D


(Provided by WtW, Inc.)


The Ways to Work (WtW) program is a unique economic empowerment initiative that provides
hardworking, credit-challenged families with a hand up to increased financial stability through
a program model combining focused financial education, a low-interest loan most often used
to purchase a reliable pre-owned vehicle, and case management support throughout the
loan repayment period. We provide an alternative to predatory lenders for families with a
demonstrated commitment to achieving greater economic self-sufficiency.

Far from being a luxury item, in our society, a car often is a necessity for getting or keeping a
job. In urban areas, public transportation systems typically aren’t capable of meeting everyone’s
needs — particularly in the case of low-income workers who work night shifts or have multi-
point commutes to jobs, daycare and school. In rural areas, public transportation alternatives
are rare. A car can help struggling families to find and keep employment, regularize their lives
and finances, and transport their children to child care, school and youth activities. It can help
families move along the path to self-sufficiency and a brighter future.

B A CK G RO U N D AN D H ISTORY


WtW was established by the McKnight Foundation in 1984, as a temporary loan program to
help poor, single mothers contend with unexpected expenses that might otherwise cause them
to drop out of the workforce. Originally called the Single Parent Loan Program, and then the
Family Loan Program, the effort was located at sites throughout Minnesota.

When McKnight partnered with the Alliance for Children and Families in 1996, loan offices were
established outside Minnesota. This strategic partnership allowed the Family Loan Program
to co-locate with established Alliance agencies and leverage those organizations’ resources,
networks and local credibility. It also enabled the national replication of the approach that had
proven to be successful in Minnesota.

By 1998, when the Family Loan Program changed its name to WtW, and incorporated as a
sister 501(c) 3 organization to the Alliance, there were 17 loan offices in 14 states. McKnight
committed an additional $5 million to WtW under a 10-year demonstration program to expand
the program nationally and prove the merits of the model. Bank of America joined McKnight in
the demonstration by providing $8 million in low-interest debt capital to WtW.




December 2011                                                                                         85
                                                                   2011 Ways to Work Evaluation Appendix D



In 1999, WtW, Inc. was certified by the U.S. Department of Treasury as a CDFI and received a
$2 million grant from the CDFI fund. Also that year, the U.S. Congress appropriated $1 million
in Department of Transportation funds for WtW programs in Alabama. This funding, and an
additional $14 million in federal grants over the next five years, spurred a period of accelerated
growth, with new and expanded WtW offices springing up across the country.

In the years since, Ways to Work has received strong support from the U.S. Department of
Transportation, including more than $17 million in matching funds from the Job Access Reverse
Commute program of the Federal Transit Administration. Several other important funders,
notably the Packard and Annie E. Casey foundations and United Ways across the country,
have provided significant aid for program expansion and development. In 2005, a major
milestone was met when Ways to Work made its 10,000th loan since beginning the national
replication effort in 1996.

To date, Ways to Work has helped nearly 32,000 families access more than $63 million in
affordable loans. Thanks to our network partners — the local nonprofit agencies that host
Ways to Work in their local communities — 2011 was a record-breaking year for Ways to Work.
The network delivered $5.8 million in new loans for families, a 41% increase over 2010 and
the largest amount in the history of the Ways to Work program.

T HE WAY S TO W OR K A PP R OA C H


WtW is geared toward families who have demonstrated that they are ready to move forward by
getting and holding a job and taking on the responsibility of obtaining and paying back a loan.
All loan applicants are required to realistically assess their financial situation and to develop a
monthly family budget with the assistance of their loan officer. The importance of a good credit
rating, and credit repair strategies and techniques, are particular areas for emphasis during the
application process.

Financial literacy training is key to the WtW model — the primary goal of the program is for
borrowers to pay off their loan, in full and on time, and move on to be financially successful
when their WtW experience has come to an end.

Here is the way the process works: A member agency of the Alliance for Children and Families
hosts each loan office. The member organization provides staff, office space, supervision and
the annual operational funding. Although each office belongs to the national WtW network,
they are local programs and can differ somewhat in their approach as appropriate to their
community’s characteristics and the specific needs to which they are responding.




December 2011                                                                                           86
                                                                    2011 Ways to Work Evaluation Appendix D



About 95% of all WtW loans are made for the purchase of used vehicles. A small number are
made for items that can help to improve job prospects or advancement, such as uniforms,
books, tools or equipment, and other work-related expenses, or to fill in gaps where no other
funding is available. The loans are marketed and applications are processed by local WtW staff.

When an applicant has met all program criteria and provided all the required information, a
decision on the loan application is made by a local, volunteer loan committee. A WtW loan
officer presents the applicant’s information to the loan committee which then makes the decision
based on their assessment of whether or not they believe the applicant will meet repayment
requirements. The loans are made on two-year terms.

When a loan is approved, the information is transferred to a local bank partner who completes
the loan process and provides the funds. WtW guarantees the loan, and makes capital available
to its local Alliance host for loan collateral with the local bank partner. The cash collateral deposit
at the local bank earns interest to offset costs to the agency and includes a degree of risk
sharing in the rare event of severe loan losses within the program. In most cases, the local
WtW loan officer handles most direct collection activities that might arise.

The national WtW office facilitates the replication of the loan program across the nation.
National management and staff work closely with local Alliance member organizations during
the program development stage, and the national office provides access to loan capital,
customized software, training, and technical assistance. WtW also monitors performance
benchmarks and provides comprehensive oversight to support local agencies in managing
their loan portfolios and overall program performance.




December 2011                                                                                            87
                                                  Ways to Work, Inc.

                   A national financial intermediary affiliated with the Alliance for Children and Families
                      and a member company of Families International, Inc., group of Companies.




                                               with the generous support of




11700 West Lake Park Drive | Milwaukee, Wisconsin 53224 | phone 866.252.7171 | fax 414.359.9548 | waystowork.org

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:1
posted:6/2/2012
language:
pages:102