Framing effects, earnings expectations, and the design of student loan repayment schemes

• 成果类型: Article
• 署名作者: Abraham, Katharine G.; Filiz-Ozbay, Emel; Ozbay, Erkut Y.; Turner, Lesley J.
• 署名单位: University System of Maryland; University of Maryland College Park; National Bureau of Economic Research; Vanderbilt University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2019.104067
• 发表日期: 2020
• 关键词: Student loans; Higher education; government expenditures; Income-driven repayment; Income-share agreement

摘要

Income-driven student loan repayment (IDR) plans provide protection against unaffordable loan payments and default by linking loan payments to borrower's earnings. Despite the advantages IDR would offer to many borrowers, take-up remains low. We use a survey experiment investigate how framing affects University of Maryland undergraduates' take-up of IDR in a set of hypothetical scenarios. Students are significantly more likely to choose IDR when the insurance aspects of IDR are emphasized and significantly less likely to do so when costs are emphasized. IDR framing interacts with expected labor market outcomes. Emphasizing the insurance aspects of IDR has larger effects on students who anticipate a higher probability of nonemployment and/or low earnings at graduation. In contrast, when costs are emphasized, the choice of IRDR is uncorrelated with students' expected labor market outcomes. Simulation results suggest that a simple change in the framing of IDR could generate substantial reductions in loan defaults with only small decreases in long-run federal revenue. (C) 2019 Elsevier B.V. All rights reserved.