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

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

Journal of Economic Behavior & Organization, 2021, vol. 189, issue C, 470-489

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.

Keywords: Financial aid; Student loans; Experimental design (search for similar items in EconPapers)
JEL-codes: C93 G40 I22 I23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:189:y:2021:i:c:p:470-489

DOI: 10.1016/j.jebo.2021.04.023

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