The Effects of Default Choice on Student Loan Borrowing: Experimental Evidence from a Public Research University

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

No 28703, NBER Working Papers from National Bureau of Economic Research, Inc

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 were almost five percent less likely to accept all packaged loans and borrowed between 4.6 and 4.8 percent less in federal educational loans. The reductions in borrowing appears to be concentrated within unsubsidized loans with those assigned to the opt-in condition borrowing 8.3 percent less in unsubsidized 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.

JEL-codes: I22 I23 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-cbe and nep-exp
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