IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/17811.html
   My bibliography  Save this paper

Information Constraints and Financial Aid Policy

Author

Listed:
  • Judith Scott-Clayton

Abstract

One justification for public support of higher education is that prospective students, particularly those from underprivileged groups, lack complete information about the costs and benefits of a college degree. Beyond financial considerations, students may also lack information about what they need to do academically to prepare for and successfully complete college. Yet until recently, college aid programs have typically paid little attention to students' information constraints, and the complexity of some programs can exacerbate the problem. This chapter describes the information problems facing prospective students as well as their consequences, drawing upon economic theory and empirical evidence.

Suggested Citation

  • Judith Scott-Clayton, 2012. "Information Constraints and Financial Aid Policy," NBER Working Papers 17811, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17811
    Note: ED
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w17811.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas J. Kane, 2007. "Evaluating the Impact of the D.C. Tuition Assistance Grant Program," Journal of Human Resources, University of Wisconsin Press, vol. 42(3).
    2. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David I. Laibson, 2007. "The age of reason: financial decisions over the lifecycle," Working Paper Series WP-07-05, Federal Reserve Bank of Chicago.
    3. Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 225-256, July.
    4. Ted O'Donoghue & Matthew Rabin, 2001. "Choice and Procrastination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 121-160.
    5. Philip Oreopoulos & Daniel Lang & Joshua Angrist, 2009. "Incentives and Services for College Achievement: Evidence from a Randomized Trial," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 136-163, January.
    6. Nicholas Barr, 2004. "Higher Education Funding," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(2), pages 264-283, Summer.
    7. Susan Dynarski, 2004. "The New Merit Aid," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 63-100, National Bureau of Economic Research, Inc.
    8. repec:mpr:mprres:3250 is not listed on IDEAS
    9. Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.
    10. Susan Dynarski, 2008. "Building the Stock of College-Educated Labor," Journal of Human Resources, University of Wisconsin Press, vol. 43(3), pages 576-610.
    11. Barr, Nicholas, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    12. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
    13. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 2, chapter 25, pages 1435-1503, Elsevier.
    14. Eric Bettinger, 2004. "How Financial Aid Affects Persistence," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 207-238, National Bureau of Economic Research, Inc.
    15. Dynarski, Susan M. & Scott–Clayton, Judith E., 2006. "The Cost of Complexity in Federal Student Aid: Lessons From Optimal Tax Theory and Behavioral Economics," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 319-356, June.
    16. Caroline M. Hoxby, 2004. "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It," NBER Books, National Bureau of Economic Research, Inc, number hoxb04-1, July.
    17. John Bound & Sarah Turner, 2002. "Going to War and Going to College: Did World War II and the G.I. Bill Increase Educational Attainment for Returning Veterans?," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 784-815, October.
    18. John Bound & Michael F. Lovenheim & Sarah Turner, 2012. "Increasing Time to Baccalaureate Degree in the United States," Education Finance and Policy, MIT Press, vol. 7(4), pages 375-424, September.
    19. Thomas J. Kane, 2003. "A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going," NBER Working Papers 9703, National Bureau of Economic Research, Inc.
    20. Jeff Dominitz & Charles F. Manski, 1996. "Eliciting Student Expectations of the Returns to Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 1-26.
    21. David Deming & Susan Dynarski, 2009. "Into College, Out of Poverty? Policies to Increase the Postsecondary Attainment of the Poor," NBER Working Papers 15387, National Bureau of Economic Research, Inc.
    22. Christopher Avery & Thomas J. Kane, 2004. "Student Perceptions of College Opportunities. The Boston COACH Program," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 355-394, National Bureau of Economic Research, Inc.
    23. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    24. Julian R. Betts, 1996. "What Do Students Know about Wages? Evidence from a Survey of Undergraduates," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 27-56.
    25. Christopher M. Cornwell & David B. Mustard & Deepa Sridhar, 2005. "The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's HOPE Scholarship," HEW 0501002, University Library of Munich, Germany.
    26. Neil S. Seftor & NSarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 336-352.
    27. Caroline Minter Hoxby, 2004. "Introduction to "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It"," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 1-12, National Bureau of Economic Research, Inc.
    28. Charles T. Clotfelter & Michael Rothschild, 1993. "Studies of Supply and Demand in Higher Education," NBER Books, National Bureau of Economic Research, Inc, number clot93-1, July.
    29. Annamaria Lusardi & Olivia S. Mitchell & Vilsa Curto, 2009. "Financial Literacy among the Young: Evidence and Implications for Consumer Policy," NBER Working Papers 15352, National Bureau of Economic Research, Inc.
    30. Shlomo Benartzi & Richard Thaler, 2007. "Heuristics and Biases in Retirement Savings Behavior," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 81-104, Summer.
    31. Dynarski, Susan & Wiederspan, Mark, 2012. "Student Aid Simplification: Looking Back and Looking Ahead," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(1), pages 211-234, March.
    32. Christopher Avery & Caroline Minter Hoxby, 2004. "Do and Should Financial Aid Packages Affect Students' College Choices?," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 239-302, National Bureau of Economic Research, Inc.
    33. Charles F. Manski, 1993. "Adolescent Econometricians: How Do Youth Infer the Returns to Schooling?," NBER Chapters, in: Studies of Supply and Demand in Higher Education, pages 43-60, National Bureau of Economic Research, Inc.
    34. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
    35. Marianne Bertrand & Sendhil Mullainathan & Eldar Shafir, 2004. "A Behavioral-Economics View of Poverty," American Economic Review, American Economic Association, vol. 94(2), pages 419-423, May.
    36. Burdman, Pamela, 2005. "The Student Debt Dilemma: Debt Aversion as a Barrier to College Access," University of California at Berkeley, Center for Studies in Higher Education qt6sp9787j, Center for Studies in Higher Education, UC Berkeley.
    37. Eric P. Bettinger & Bridget Terry Long & Philip Oreopoulos & Lisa Sanbonmatsu, 2009. "The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment," NBER Working Papers 15361, National Bureau of Economic Research, Inc.
    38. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
    39. Robert Jensen, 2010. "The (Perceived) Returns to Education and the Demand for Schooling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(2), pages 515-548.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Harald Beyer & Justine Hastings & Christopher Neilson & Seth Zimmerman, 2015. "Connecting Student Loans to Labor Market Outcomes: Policy Lessons from Chile," American Economic Review, American Economic Association, vol. 105(5), pages 508-513, May.
    2. Bleemer, Zachary & Zafar, Basit, 2018. "Intended college attendance: Evidence from an experiment on college returns and costs," Journal of Public Economics, Elsevier, vol. 157(C), pages 184-211.
    3. Eleanor Wiske Dillon & Jeffrey Andrew Smith, 2020. "The Consequences of Academic Match between Students and Colleges," Journal of Human Resources, University of Wisconsin Press, vol. 55(3), pages 767-808.
    4. Justine S. Hastings & Christopher A. Neilson & Seth D. Zimmerman, 2013. "Are Some Degrees Worth More than Others? Evidence from college admission cutoffs in Chile," NBER Working Papers 19241, National Bureau of Economic Research, Inc.
    5. Frauke H. Peter & Vaishali Zambre, 2014. "Wer studiert, ist informiert?: Studienentscheidungen und Informationsdefizite," DIW Roundup: Politik im Fokus 35, DIW Berlin, German Institute for Economic Research.
    6. Ehlert, Martin & Finger, Claudia & Rusconi, Alessandra & Solga, Heike, 2017. "Applying to college: Do information deficits lower the likelihood of college-eligible students from less-privileged families to pursue their college intentions?: Evidence from a field experiment," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 67, pages 193-212.
    7. Justine Hastings & Christopher A. Neilson & Seth D. Zimmerman, 2015. "The Effects of Earnings Disclosure on College Enrollment Decisions," NBER Working Papers 21300, National Bureau of Economic Research, Inc.
    8. Murphy, Richard & Scott-Clayton, Judith & Wyness, Gill, 2019. "The end of free college in England: Implications for enrolments, equity, and quality," Economics of Education Review, Elsevier, vol. 71(C), pages 7-22.
    9. Murphy, Richard & Scott-Clayton, Judith & Wyness, Gill, 2017. "The end of free college in England: implications for quality, enrolments and equity," LSE Research Online Documents on Economics 86593, London School of Economics and Political Science, LSE Library.
    10. H. Kenny Nienhusser & Toko Oshio, 2017. "High School Students’ Accuracy in Estimating the Cost of College: A Proposed Methodological Approach and Differences Among Racial/Ethnic Groups and College Financial-Related Factors," Research in Higher Education, Springer;Association for Institutional Research, vol. 58(7), pages 723-745, November.
    11. Martin McGuigan & Sandra McNally & Gill Wyness, 2014. "Student Awareness of Costs and Benefits of Educational Decisions: Effects of an Information Campaign and Media Exposure," DoQSS Working Papers 14-19, Quantitative Social Science - UCL Social Research Institute, University College London.
    12. Nicholas W. Hillman & Erica Lee Orians, 2013. "Financial Aid's Role in Meeting State College Completion Goals," Education Finance and Policy, MIT Press, vol. 8(3), pages 349-363, July.
    13. Pistolesi, Nicolas, 2017. "Advising students on their field of study: Evidence from a French University reform," Labour Economics, Elsevier, vol. 44(C), pages 106-121.
    14. Martin McGuigan & Sandra McNally & Gill Wyness, 2016. "Student Awareness of Costs and Benefits of Educational Decisions: Effects of an Information Campaign," Journal of Human Capital, University of Chicago Press, vol. 10(4), pages 482-519.
    15. Jacqmin, Julien, 2014. "The Emergence of For-Profit Higher Education Institutions," MPRA Paper 59299, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Deming & Susan Dynarski, 2009. "Into College, Out of Poverty? Policies to Increase the Postsecondary Attainment of the Poor," NBER Working Papers 15387, National Bureau of Economic Research, Inc.
    2. Gabrielle Fack & Julien Grenet, 2015. "Improving College Access and Success for Low-Income Students: Evidence from a Large Need-Based Grant Program," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 1-34, April.
    3. Lindsay C. Page & Judith Scott-Clayton, 2015. "Improving College Access in the United States: Barriers and Policy Responses," NBER Working Papers 21781, National Bureau of Economic Research, Inc.
    4. Page, Lindsay C. & Scott-Clayton, Judith, 2016. "Improving college access in the United States: Barriers and policy responses," Economics of Education Review, Elsevier, vol. 51(C), pages 4-22.
    5. Eric Bettinger & Oded Gurantz & Laura Kawano & Bruce Sacerdote, 2016. "The Long Run Impacts of Merit Aid: Evidence from California’s Cal Grant," NBER Working Papers 22347, National Bureau of Economic Research, Inc.
    6. Susan M. Dynarski & Judith E. Scott-Clayton, 2008. "Complexity and Targeting in Federal Student Aid: A Quantitative Analysis," NBER Chapters, in: Tax Policy and the Economy, Volume 22, pages 109-150, National Bureau of Economic Research, Inc.
    7. David Deming & Susan Dynarski, 2010. "College Aid," NBER Chapters, in: Targeting Investments in Children: Fighting Poverty When Resources Are Limited, pages 283-302, National Bureau of Economic Research, Inc.
    8. Benjamin M. Marx & Lesley J. Turner, 2015. "Borrowing Trouble? Student Loans, the Cost of Borrowing, and Implications for the Effectiveness of Need-Based Grant Aid," NBER Working Papers 20850, National Bureau of Economic Research, Inc.
    9. French, Robert & Oreopoulos, Philip, 2017. "Behavioral barriers transitioning to college," Labour Economics, Elsevier, vol. 47(C), pages 48-63.
    10. Benjamin L. Castleman & Bridget Terry Long, 2016. "Looking beyond Enrollment: The Causal Effect of Need-Based Grants on College Access, Persistence, and Graduation," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 1023-1073.
    11. Stella M. Flores & Justin C. Shepherd, 2014. "Pricing Out the Disadvantaged? The Effect of Tuition Deregulation in Texas Public Four-Year Institutions," The ANNALS of the American Academy of Political and Social Science, , vol. 655(1), pages 99-122, September.
    12. Susan Dynarski, 2008. "Building the Stock of College-Educated Labor," Journal of Human Resources, University of Wisconsin Press, vol. 43(3), pages 576-610.
    13. Dynarski, Susan M. & Scott–Clayton, Judith E., 2006. "The Cost of Complexity in Federal Student Aid: Lessons From Optimal Tax Theory and Behavioral Economics," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 319-356, June.
    14. Waddell, Glen R. & Singell Jr., Larry D., 2011. "Do no-loan policies change the matriculation patterns of low-income students?," Economics of Education Review, Elsevier, vol. 30(2), pages 203-214, April.
    15. Ran Abramitzky & Victor Lavy, 2014. "How Responsive Is Investment in Schooling to Changes in Redistributive Policies and in Returns?," Econometrica, Econometric Society, vol. 82(4), pages 1241-1272, July.
    16. Eric P. Bettinger & Bridget Terry Long & Philip Oreopoulos & Lisa Sanbonmatsu, 2009. "The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment," NBER Working Papers 15361, National Bureau of Economic Research, Inc.
    17. Damgaard, Mette Trier & Nielsen, Helena Skyt, 2018. "Nudging in education," Economics of Education Review, Elsevier, vol. 64(C), pages 313-342.
    18. Scott Carrell & Bruce Sacerdote, 2017. "Why Do College-Going Interventions Work?," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 124-151, July.
    19. Giovanni Abbiati & Carlo Barone, 2017. "Is university education worth the investment? The expectations of upper secondary school seniors and the role of family background," Rationality and Society, , vol. 29(2), pages 113-159, May.
    20. Bednar, Steven & Gicheva, Dora, 2013. "Tax benefits for graduate education: Incentives for whom?," Economics of Education Review, Elsevier, vol. 36(C), pages 181-197.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17811. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.