TY - JOUR
T1 - Student loan nudges
T2 - Experimental evidence on borrowing and educational attainment
AU - Marx, Benjamin Michael
AU - Turner, Lesley J.
N1 - Funding Information:
* Marx: Department of Economics, University of Illinois, 214 David Kinley Hall, 1407 W. Gregory, Urbana, IL 61801 (email: benmarx@illinois.edu); Turner: Department of Economics, University of Maryland, 3115E Tydings Hall, College Park, MD 20742, and NBER (email: turner@econ.umd.edu). John Friedman was coeditor for this article. We are grateful to the Lumina Foundation and ideas42 (grant 9073) and the Russell Sage Foundation (award 98-07-12) for financial support and to the participating community colleges for carrying out the experiments and providing the data used in this study. We also thank Eric Bettinger, Colleen Campbell, Judy Scott-Clayton, Dan Connolly, Stephen DesJardins, Alissa Fishbane, Judd Kessler, Jee Hang Lee, Dave Marcotte, and seminar participants at the Federal Reserve Bank of Chicago, Kansas State University, McMaster University, National University of Singapore, Teachers College Columbia University, University of Birmingham, University of Illinois, University of Maryland, University of North Carolina at Charlotte, University of Nottingham, 2015 TIBER Symposium on Psychology and Economics, 2015 and 2017 APPAM annual meetings, 2016 Advances with Field Experiments meeting, 2016 AEFP annual meeting, 2016 CESifo Area Conference on the Economics of Education, 2016 IPA Researcher Gathering on Financial Inclusion, 2016 NBER Fall Education Meeting, 2017 Early-Career Behavioral Economics Conference, and 2018 ASSA Annual Meeting for helpful comments and suggestions. Yuci Chen and Brian Feld provided excellent research assistance. The project was registered in the AEA RCT Registry with ID number AEARCTR-0000633 and approved by the UIUC Institutional Review Board under protocol #15366.
Publisher Copyright:
© 2019 American Economic Association.
PY - 2019/5/1
Y1 - 2019/5/1
N2 - We provide the first experimental evidence on the effect of student loans on educational attainment. Loan amounts listed in financial aid award letters ("offers") do not alter students' choice sets but significantly affect borrowing. Students randomly receiving a nonzero offer were 40 percent more likely to borrow than those who received a $0 offer. Per additional borrower, loans increased by $4,000, GPA and completed credits increased by 30 percent, and transfers to four- year public colleges increased by 11 percentage points. Cost- benefit and theoretical analyses suggest nonzero offers enhance welfare, yet over five million students are not currently offered loans.
AB - We provide the first experimental evidence on the effect of student loans on educational attainment. Loan amounts listed in financial aid award letters ("offers") do not alter students' choice sets but significantly affect borrowing. Students randomly receiving a nonzero offer were 40 percent more likely to borrow than those who received a $0 offer. Per additional borrower, loans increased by $4,000, GPA and completed credits increased by 30 percent, and transfers to four- year public colleges increased by 11 percentage points. Cost- benefit and theoretical analyses suggest nonzero offers enhance welfare, yet over five million students are not currently offered loans.
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U2 - 10.1257/pol.20180279
DO - 10.1257/pol.20180279
M3 - Article
AN - SCOPUS:85066049179
SN - 1945-7731
VL - 11
SP - 108
EP - 141
JO - American Economic Journal: Economic Policy
JF - American Economic Journal: Economic Policy
IS - 2
ER -