Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection"

Ege Aksu (), Sidhya Balakrishnan, Eric Bettinger, Jonathan Hartley, Michael Kofoed, Dubravka Ritter and Douglas Webber
Additional contact information
Ege Aksu: https://jainfamilyinstitute.org/our-team/ege-aksu/
Sidhya Balakrishnan: https://jainfamilyinstitute.org/our-team/sidhya-balakrishnan/

No 24-07, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framing of downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with varying outcomes.

Keywords: education finance; education insurance; income insurance; adverse selection; financial aid; income-share agreement; ISA; student loan; student debt; higher education; income-driven repayment; IDR; income-contingent financing (search for similar items in EconPapers)
JEL-codes: D14 D82 G51 H81 I22 (search for similar items in EconPapers)
Pages: 56
Date: 2024-03-18
New Economics Papers: this item is included in nep-exp
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Related works:
Working Paper: Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection (2024)
Working Paper: Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:97988

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DOI: 10.21799/frbp.wp.2024.07

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