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Reducing the Interest Rate Charged on Arrears

Some child support is unpaid, which has consequences for children whose parents do not receive the amount they are due, for the noncustodial parents (NCPs) who owe these arrears (and thus face enforcement actions), and for the child support agency (whose resources are diverted away from assisting families in other ways). With hopes of slowing the rate of growth in arrears and increasing payments on arrears, Wisconsin changed the rate of interest charged on arrears in 2014 from 1% per month to 0.5% per month. Our research questions in this report are the following: (1) How does the growth in arrears in the three years after the policy change compare to the growth in arrears one year before the policy change? (2) Was the policy change associated with differences in payments on arrears? (3) Does the policy change differentially affect certain subgroups of NCPs? Our four population subgroups include the following: those with the highest arrears burdens (arrears divided by earnings); those who only owe arrears (i.e., do not owe current support); those who owe both current support and arrears; and those who only owe current support (and no arrears).

We use the state’s child support records combined with administrative records from other programs. We examine 300,962 noncustodial parents who owed current support or had arrears at the time of the policy change. We compare the trajectory of arrears (principal and interest) before and after the policy change, controlling for other characteristics of NCPs (using a statistical technique of latent growth curve analysis). We also examine payments on arrears among those who owed arrears, before and after the policy change, while controlling for other factors.

Most NCPs in our sample were male, average 44 years old, and had relatively low earnings. Average arrears debt was more than $15,000. We find that arrears growth slowed in the years after the policy change. Compared to the year before the change, arrears growth slowed by more than $400 in the first year, and even more in the second and third, totaling about $1,500 during this three-year period. The subgroup of those who had the highest burdens showed the largest slowdown, with arrears growth in the three years after the change $3,000 less than before the change. Through examining those who owed arrears and comparing the year preceding the policy change to the three years after, we find an increase in the amount paid towards arrears in each of the three post-policy-change years. These increases averaged between $75 and $100/year. Payment increases were highest for those who owed both current support and arrears.

Although there are limitations and questions not studied, we highlight that reducing the interest rate on arrears is associated with a substantial slowing of the rate of arrears growth and, among NCPs with arrears, with an increase in payments toward arrears.


Arrears & Related Policy, Child Support, Child Support Policy Research, WI Administrative Data Core


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