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The effects of default choice on student loan borrowing: Experimental evidence from a public research university

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  • Kramer, Dennis A.
  • Lamb, Christina
  • Page, Lindsay C.

Abstract

We explore the role of defaults and choice architecture on student loan decision-making, experimentally testing the impact pre-populating either decline or accept decisions compared to an active choice, no pre-population, decision. We demonstrate that the default choice presented does influence student loan borrowing decisions. Specifically, compared to active choice, students presented within a pre-populated decline decision (opt-in) were almost five percent less likely to accept all packaged loans and borrowed between 4.6% and 4.8% less in federal student loans. The reductions in borrowing appears to be concentrated within unsubsidized loans with those assigned to the opt-in condition borrowing 8.3% less in unsubsidized student loans. These changes in borrowing did not induce substitution towards private or Parent PLUS loans nor did they negatively impact enrollment, academic performance, or on-campus work outcomes in the same academic year.

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  • Kramer, Dennis A. & Lamb, Christina & Page, Lindsay C., 2021. "The effects of default choice on student loan borrowing: Experimental evidence from a public research university," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 470-489.
    • Handle: RePEc:eee:jeborg:v:189:y:2021:i:c:p:470-489
    DOI: 10.1016/j.jebo.2021.04.023
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    Cited by:

    1. Behlen, Lars & Himmler, Oliver & Jaeckle, Robert, 2022. "Can defaults change behavior when post-intervention effort is required? Evidence from education," MPRA Paper 112962, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial aid; Student loans; Experimental design;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • G40 - Financial Economics - - Behavioral Finance - - - General

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