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Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?

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  • Maximilian D. Schmeiser
  • Christiana Stoddard
  • Carly Urban

Abstract

While rising student loan debt can plague college students future finances, few federal programs have been instituted to educate college students on the mechanics of student loan borrowing. This paper exploits a natural experiment in which some students received \"Know Your Debt\" letters with incentivized offers for one-on-one financial counseling. Montana State University students who reached a specific debt threshold received these letters; University of Montana students did not. We use a difference-in-difference-in-differences strategy to compare students above and below the thresholds across campuses and before and after the intervention to determine how the letters affect student behavior. Employing a rich administrative dataset on individual-level academic records and financial aid packages, we find that students receiving the letters borrow an average of $1,360, less in the subsequent semester--a reduction of one-third. This does not adversely affect their academic performance. In fact, those who receive the intervention take more credits and have higher GPAs in the subsequent semester.

Suggested Citation

  • Maximilian D. Schmeiser & Christiana Stoddard & Carly Urban, 2015. "Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?," Finance and Economics Discussion Series 2015-75, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2015-75
    DOI: 10.17016/FEDS.2015.075
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    References listed on IDEAS

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    Cited by:

    1. Rajeev Darolia, 2016. "An Experiment on Information Use in College Student Loan Decisions," Working Papers 16-18, Federal Reserve Bank of Philadelphia.
    2. Robert Clifford, 2016. "Student-loan debt, delinquency, and default: a New England perspective," New England Public Policy Center Research Report 16-1, Federal Reserve Bank of Boston.
    3. Maximilian Schmeiser & Christiana Stoddard & Carly Urban, 2016. "Student Loan Information Provision and Academic Choices," American Economic Review, American Economic Association, vol. 106(5), pages 324-328, May.

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    Keywords

    financial counseling; financial education; financial literacy; higher education; student loans;
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