The Role of Information in the Take-Up of Student Loans

Tinbergen Institute Discussion Paper No. TI 2008-039/3

19 Pages Posted: 9 Apr 2008

See all articles by Adam S. Booij

Adam S. Booij

Amsterdam School of Economics

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB); IZA Institute of Labor Economics

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute Amsterdam (TIA); Institute for the Study of Labor (IZA)

Date Written: April 1, 2008

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. This is illustrated by government student loans in the Netherlands which are intended to alleviate liquidity constraints. Despite generous loan conditions, take-up rates on these loans are low. Some have argued that this is due to limited knowledge about these conditions. We examine the importance of information constraints through a randomized experiment. Half of the students who responded to an Internet questionnaire were given factual information on loan conditions, whereas the other half did not receive such information. Six months later, students who received information have better knowledge about the loan conditions. While OLS regressions reveal a large and significantly positive association between knowledge about loan conditions and borrowing, our instrumental variable estimates suggest that this is not a causal effect which would rule out that the low take-up rate is caused by information constraints.

Keywords: Field experiment, Student debt, Student loans, Loan conditions

JEL Classification: I22, I28, D83

Suggested Citation

Booij, Adam S. and Leuven, Edwin and Oosterbeek, Hessel, The Role of Information in the Take-Up of Student Loans (April 1, 2008). Tinbergen Institute Discussion Paper No. TI 2008-039/3, Available at SSRN: https://ssrn.com/abstract=1118253 or http://dx.doi.org/10.2139/ssrn.1118253

Adam S. Booij (Contact Author)

Amsterdam School of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 4242 (Phone)
+31 20 525 5283 (Fax)

HOME PAGE: http://www.fee.uva.nl/scholar/oosterbeek/

Tinbergen Institute Amsterdam (TIA)

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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