Test-Optional Admissions and Student Debt

Abstract

Applicants who forgo submitting standardized test scores signal that they have fewer enrollment options. Facing fewer competitors, test-optional schools can charge more. We find that graduates admitted under a test-optional policy borrow $1,358 (2016$) more than those required to submit their scores. This amount represents about 5 percent of the average debt of bachelor’s degree holders. As the number of test-optional schools has increased, each successive post-switching graduating class borrows less. We also show that the share of graduates with debt drops after the switch to test-optional admissions but rises as the number of test-optional competitors increases.

Keywords: Student Debt, Test-Optional Admissions, Standardized Tests, College Tuition, Market Power

JEL Classification: I22, I23, L13