Drop-out From Individual Development Accounts: Prediction and Prevention

Individual Development Accounts (IDAs) help the poor build assets by providing matches for savings used for home ownership, post-secondary education, and microenterprise. IDAs cannot help, however, if participants drop out. What factors predict drop-out? And what can be done to prevent it? For IDAs in the American Dream Demonstration, drop-out is less likely if participants already own some assets, be they human capital in education or experience, financial capital in bank accounts, social capital in marriage, or physical capital in homes or cars. Income and welfare receipt are not linked with drop-out. Drop-out is strongly associated with aspects of IDA design such as match rates, time caps, and the use of automatic transfer. Because drop-out can be predicted, IDA programs can keep costs down while targeting additional assistance to the most atrisk enrollees.

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