Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?

Abstract

While rising student loan debt can plague college students future finances, few federal programs have been instituted to educate college students on the mechanics of student loan borrowing. This paper exploits a natural experiment in which some students received "Know Your Debt" letters with incentivized offers for one-on-one financial counseling. Montana State University students who reached a specific debt threshold received these letters; University of Montana students did not. We use a difference-in-difference-in-differences strategy to compare students above and below the thresholds across campuses and before and after the intervention to determine how the letters affect student behavior. Employing a rich administrative dataset on individual-level academic records and financial aid packages, we find that students receiving the letters borrow an average of $1,360, less in the subsequent semester-a reduction of one-third. This does not adversely affect their academic performance.In fact, those who receive the intervention take more credits and have higher GPAs in the subsequent semester.

An Experiment on Information Use in College Student Loan Decisions

“…This paper includes results from a randomized eld experiment that evaluates a lowintensity informational intervention aimed at helping college students make informed and active student loan decisions. While there are some modest behavior changes among some student subgroups, there are substantially smaller borrowing eects across all students in comparison with other more intensive institution-based initiatives related to student borrowing (Kennedy, 2015;Schmeiser et al, 2015). This suggests that information alone is not sucient to drive systematically dierent borrowing choices among students and that other supports are likely necessary to aect behavior.…”

“…The experiment in this study situates itself in the context of initiatives by universities to decrease the borrowing of their students (Kennedy, 2015;Schmeiser et al, 2015), and from which laws have been enacted based on reported ndings.…”

Campus Adaptations Vary On Source of College Expense among Engineering Undergraduate Students

“…College academic integration and financial aid receipt exhibit differential effects on entering engineering (Xueli Wang, 2013). The financial information students borrowing behaviour and academic performance (Schmeiser, Stoddard, & Urban, 2015). Lastly poverty impact attendance (E. Chen,…”