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

FEDS Working Paper No. 2015-075

http://dx.doi.org/10.17016/FEDS.2015.075

38 Pages Posted: 21 Sep 2015 Last revised: 24 Oct 2015

See all articles by Maximilian D. Schmeiser

Maximilian D. Schmeiser

Amazon Lending

Christiana Stoddard

Montana State University - Bozeman

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Date Written: September 18, 2015

Abstract

The rising incidence and amount of student loan debt among young adults has significant implications for their economic well-being. However, students are generally provided little information on how to finance postsecondary education and how much to borrow. This paper studies how information can change student loan behavior among college students. We exploit a natural experiment across two large public colleges in which some students at one institution above a specific loan amount received "Know Your Debt" letters with information about their student loan debt, suggestions on how to manage their debt, and incentivized offers for one-on-one financial counseling, while the remainder did not. Using a difference-in-difference-in-difference strategy and 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 reduction in borrowing does not adversely affect academic performance. In fact, those who receive the intervention take more credits and have higher GPAs in the subsequent semester.

Keywords: financial counseling, financial education, financial literacy, higher education, student loans

JEL Classification: I22, A22, D14, D83, H52

Suggested Citation

Schmeiser, Maximilian D. and Stoddard, Christiana and Urban, Carly, Does Salient Financial Information Affect Academic Performance and Borrowing Behavior Among College Students? (September 18, 2015). FEDS Working Paper No. 2015-075, http://dx.doi.org/10.17016/FEDS.2015.075, Available at SSRN: https://ssrn.com/abstract=2662620 or http://dx.doi.org/10.2139/ssrn.2662620

Maximilian D. Schmeiser (Contact Author)

Amazon Lending ( email )

Seattle, WA 98144
United States

Christiana Stoddard

Montana State University - Bozeman ( email )

Bozeman, MT 59717-2920
United States

Carly Urban

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States
4069942005 (Phone)

HOME PAGE: http://www.montana.edu/urban

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