The effects of default choice on student loan borrowing: Experimental evidence from a public research university

Abstract

We explore the role of defaults and choice architecture on student loan decision-making, experimentally testing the impact pre-populating either decline or accept decisions compared to an active choice, no pre-population, decision. We demonstrate that the default choice presented does influence student loan borrowing decisions. Specifically, compared to active choice, students presented within a pre-populated decline decision (opt-in) were almost five percent less likely to accept all packaged loans and borrowed between 4.6% and 4.8% less in federal student loans. The reductions in borrowing appears to be concentrated within unsubsidized loans with those assigned to the opt-in condition borrowing 8.3% less in unsubsidized student loans. These changes in borrowing did not induce substitution towards private or Parent PLUS loans nor did they negatively impact enrollment, academic performance, or on-campus work outcomes in the same academic year.