Working Paper: NBER ID: w25905
Authors: Benjamin M. Marx; Lesley J. Turner
Abstract: What influences college student borrowing? In a field experiment with a large community college, we send emails about federal student loans to students who have received information about financial aid but have not made a borrowing decision. A treatment reminding students that they need not borrow the maximum amount of available loan aid does not affect borrowing. Treatments referencing amounts borrowed by recent graduates shift students from borrowing the maximum amount to not borrowing. Consistent with the hypothesis that students experience choice overload when observing multiple dollar amounts, the response is largest among low-performing students and arises from inaction.
Keywords: student loans; borrowing decisions; choice overload; behavioral economics
JEL Codes: D12; D14; D91; H31; I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reference point treatments (C21) | decrease in borrowing (G51) |
| reference point treatments (C21) | decrease in amount borrowed (G21) |
| reference point treatments (C21) | induce students to borrow nothing (G51) |
| reminder to borrow less (G51) | no effect on borrowing decisions (G51) |
| reference amounts of past graduates (A23) | decrease in borrowing (G51) |
| lower academic performance (D29) | pronounced treatment effects (C22) |
| independent students (I23) | pronounced treatment effects (C22) |