Small Differences That Matter: Mistakes in Applying to College

Abstract

This paper estimates the sensitivity of students' college application decisions to a small change in the cost of sending standardized test scores to colleges. Using confidential ACT micro data, I find that when the ACT increased from three to four the number of free score reports that ACT-takers could send, the fraction of test-takers sending four reports rose substantially while the fraction sending three fell by an offsetting amount. Students simultaneously sent their scores to a wider range of colleges. Using micro data from the American Freshman Survey, two identification strategies show that ACT-takers sent more college applications and low-income ACT-takers attended more selective colleges after the cost change. The first strategy compares ACT-takers before and after the cost change, controlling for time trends and covariates, and the second estimates difference-indifference regressions using SAT-takers as a control group. Back-of-the-envelope calculations suggest that by inducing low-income students to attend more selective colleges, the policy change significantly increased their expected earnings. Because the cost of sending an additional (non-free) ACT score was merely $6 throughout, this sizable behavioral change is surprising and suggests that students may use simple heuristics in making their application decisions. In such a setting, small policy perturbations can have large effects on welfare.

Every Little Bit Counts: The Impact of High-speed Internet on the Transition to College

“…In the literature, this is typically referred to as "undermatching." Three, information constraints appear to play a sizable role in under-matching (Hoxby and Avery, 2012;Turner, 2013 and2015).…”

“…Further, students' application sets are seemingly guided by defaults or perceived "recommendations." Pallais (2015) finds that students apply to more schools when given an additional free Score Send, a cost savings of $6. Cohodes and Goodman (2014) find that students forego large expected earnings for small offers of financial aid from the state.…”

“…Examples of interventions include filling out financial aid forms, counseling on the application process generally, and helping students obtain fee waivers that they were already eligible to receive (Avery and Kane, 2004;Bettinger et al, 2012;Carrell and Sacerdote, 2013;Turner, 2013 and2015). 10 Each intervention has generated large improvements in students' attendance outcomes.…”

“…A natural question follows -how can we encourage students to apply to and attend colleges that best fit their needs? Prior successful interventions have aimed to provide students with additional information (Avery and Kane, 2004;Carrell and Sacerdote, 2013) and change the way information is presented (Bettinger et al, 2012;Turner, 2013 and2015). Other studies have found that students' decisions are quite sensitive to small changes in information or costs.…”

“…Between 2000 and 2013, high-speed Internet usage increased from 3 percent to 70 percent. 3 Recent research concludes that the rollout of broadband to households had an impact on a host of outcomes, such as academic achievement (Vigdor et al, 2014;Faber et al, 2015), labor force participation (Dettling, forthcoming), voter turnout (Falck, Gold and Heblich, 2014), and 2 Evidence of students' responsiveness to small changes in information or costs include interventions that change: 1) rules of thumb (Pallais, 2015), 2) the salience of college rankings (Luca and Smith, 2013), 3) financial aid offers (Cohodes and Goodman, 2014), 4) application fees and essays , and 5) admissions exam taking (Bulman, forthcoming;Goodman, 2013;Klasik 2014;Hurwitz et al 2015). 3 High-speed internet usage rates were obtained from PEW Research at www.pewinternet.org/data-trend/internetuse/connection-type/.…”