Title
Designed to Fail: Effects of the Default Option and Information Complexity on Student Loan Repayment
Document Type
Article
Publication Date
9-1-2018
Abstract
We ask why so few student loan borrowers enroll in Income Driven Repayment when the majority would benefit from doing so. To do so we run an incentivized laboratory experiment using a facsimile of the government’s Student Loan Exit Counseling website. We test the role information complexity, uncertainty about earnings, and the default option play. We show that despite an ex ante optimal choice, the majority choose, or are defaulted into, a sub-optimal plan. We find the default option is a driver of this phenomenon, suggesting the government has an easy policy lever to lower default rates – change the default plan.
Recommended Citation
Cox, James; Kreisman, Daniel; and Dynarski, Susan, "Designed to Fail: Effects of the Default Option
and Information Complexity on Student Loan Repayment" (2018). ExCEN Working Papers. 8.
https://scholarworks.gsu.edu/excen_workingpapers/8
Comments
To learn more about the Andrew Young School of Policy Studies and ExCEN Working Papers Series, visit https://aysps.gsu.edu/ and http://excen.gsu.edu/center/.