Understanding How Information Affects Loan Aversion: A Randomized Control Trial of Providing Federal Loan Information to High School Seniors

Although the literature offers evidence of students’ aversion to borrowing for postsecondary education, it offers no insight into whether such attitudes are mutable. Through a blocked, cluster-randomized controlled trial in six diverse high schools in Louisville, Kentucky, we test whether providing student loan and repayment information affects the borrowing attitudes and perceptions of high school seniors. The information treatment involves watching a short video during class that explains federal student loans and the advantages of income-based repayment, compared with control students receiving general information about reading financial aid award letters. Students’ attitudes toward loans are then captured on a survey. Results indicate that information about loans reduces loan aversion, both on our general measure of borrowing attitudes and on our specific measure of borrowing for education—the latter by 5 percentage points, corresponding to a 30% reduction relative to control baseline. We also consider two plausible mechanisms of the treatment effect and provide evidence to suggest that the information intervention improves college enrollment. These results indicate that providing information on income-based repayment options to high school students before they make the college enrollment decision could improve college access to populations who are averse to borrowing.