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The role of information in the take-up of student loans

Adam Booij

 

Abstract

Policies need not only to be well designed to effectively address market failures, but their parameters also need to be part of agents' information sets. We study student loan behavior in the Netherlands where i) higher education students know little about the conditions of the government's financial aid program and ii) take-up rates are low. We conducted a field experiment in which we manipulated the amount of information students have about these conditions. Half a year after the treatment the same students were interviewed again. The treatment has no impact on loan take-up. This zero impact is not due to students already having decided whether to take a loan or not, and can also not be attributed to treated students not absorbing the information that is given to them. We provide the interpretation that - given that aid application is sufficiently straightforward - communicating eligibility criteria rather than precise programme details should be prioritized.

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