Putting Students on Notice: An Experiment on Information Use in College Student Loan Decisions
*Names in bold indicate Presenter
Do students understand the future implications of their borrowing decisions? There are reasons to believe that they do not. In this study, I examine whether information deficiencies and computational errors factor into college students’ borrowing decisions and if so, how they affect financial and educational choices. The primary methodology is a randomized field experiment conducted in partnership with a financial aid office. The setting is a large public university and the sample includes all non-graduating students who obtained student loans in the prior academic year (~10,000 students). I randomly assign half to receive individually-tailored letters with information that students may not have had earlier access to or well-understood; the other half will be a control group. I then compare the two groups’ choices in the following year, with outcomes including the amount of student loan debt incurred, educational major, and requests for more information. This study contributes to the literature about how college students’ make loan decisions, and also evaluates a relatively simple, low-cost intervention that could support sound borrowing decisions among students.