Working Paper: NBER ID: w28703
Authors: Dennis A. Kramer II; Christina J. Lamb; Lindsay C. Page
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.
Keywords: No keywords provided
JEL Codes: I22; I23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| default choice (decline) (D79) | student loan borrowing decisions (G51) |
| prepopulated decline decision (D91) | amount borrowed (G21) |
| opt-in default condition (Y20) | amount borrowed (G21) |
| default choice (C52) | downstream effects on enrollment, academic performance, campus employment (I23) |