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Student loans, spending, and parental transfers: Insights from a nudge in student loan policy in the Netherlands

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  • Been, Jim
  • Knoef, Marike

Abstract

This paper investigates the effect of student loans on students’ (financial) behavior. For causal identification, we exploit quasi-experimental evidence using a nudge in the take-up of student loans in higher education in the Netherlands. We estimate an instrumental variable (IV) model with a first-stage Difference-in-Differences design. We find that a decline in the default student loan reduced monthly student borrowing by 141 euros. A one-euro decline in student loans reduced students’ expenditures by 61 cents, but also led to a substantial increase of parental financial contributions (43 cents). Especially expenditures on leisure activities were affected. There is no evidence for increased labor earnings among students, on average. Self-reported indicators of academic performance do not worsen in response to the reform; students’ GPA even improves.

Suggested Citation

  • Been, Jim & Knoef, Marike, 2023. "Student loans, spending, and parental transfers: Insights from a nudge in student loan policy in the Netherlands," Economics of Education Review, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:ecoedu:v:96:y:2023:i:c:s0272775723001048
    DOI: 10.1016/j.econedurev.2023.102457
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    Keywords

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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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