Currently, U.S. higher education is characterized by high tuition levels accompanied by significant investments in financial aid to support college enrollment. This complex financial aid system has proven difficult to navigate, and students and their families often lack accurate or complete information about costs and aid. Nonetheless, students and their families make decisions about whether and where to enroll in college and how to finance college based upon this information. Recently policymakers, researchers, and advocacy groups have focused on simplifying the design and delivery of financial aid to more equitably and efficiently provide aid to students.

One way to reduce complexity is to provide a financial aid award letter communicating costs to students, but award letters often are difficult to interpret. In 2012, the U.S. Department of Education and Consumer Financial Protection Bureau released a model award letter, or “shopping sheet”, that provides simplified and personalized information about college costs and financial aid. The shopping sheet has two features distinguishing it from many award notifications: 1) it lists loans separate from other types of aid, after net cost, and 2) it provides institutional data on graduation rates, loan default rates, and median borrowing. Nearly 2,000 institutions have adopted the shopping sheet, and legislation has been introduced in the U.S. senate that would require institutions to use it in awarding financial aid. However, we know little about how this policy effort to simplify information about costs and aid influences educational decisions.

This study uses a randomized control trial at a public four-year university to examine how information about costs and aid in the shopping sheet affects student enrollment and borrowing behavior. Drawing on human capital and behavioral economic theories to understand how information shapes decisions, this research contributes to our knowledge of the educational pathways of students with financial need. Students admitted to the university in this study were randomly assigned to treatment and control conditions using the random number generator with a uniform distribution in Stata. Students in the treatment group (N=1,100) received the shopping sheet; students in the control group (N=1,555) received the award letter normally used by the university. The sample size is sufficient to detect a small effect on behavior and to test for heterogeneous treatment effects. The experiment was conducted in spring/summer 2013, and enrollment and borrowing behavior was observed in fall 2013.

Preliminary findings suggest that information provided in the shopping sheet did not influence borrowing decisions of first-year students. Specifically, information in the shopping sheet did not have a statistically significant effect on the percent of students who took out loans or the dollar amount that students borrowed. Data analysis will continue in summer 2014 to examine 1) enrollment decisions, 2) differences in public and private borrowing, and 3) heterogeneous treatment effects for low-income students who face the greatest informational barriers.

This research provides important early findings regarding the effects of reforms in financial aid delivery, and thus will inform federal policy and assist financial aid administrators in communicating costs to students.