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Board of Governors of the Federal Reserve System (U.S.)
Finance and Economics Discussion Series
Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?
Maximilian D. Schmeiser
Christiana Stoddard
Carly Urban
Abstract

While rising student loan debt can plague college students future finances, few federal programs have been instituted to educate college students on the mechanics of student loan borrowing. This paper exploits a natural experiment in which some students received "Know Your Debt" letters with incentivized offers for one-on-one financial counseling. Montana State University students who reached a specific debt threshold received these letters; University of Montana students did not. We use a difference-in-difference-in-differences strategy to compare students above and below the thresholds across campuses and before and after the intervention to determine how the letters affect student behavior. Employing a rich administrative dataset on individual-level academic records and financial aid packages, we find that students receiving the letters borrow an average of $1,360, less in the subsequent semester--a reduction of one-third. This does not adversely affect their academic performance. In fact, those who receive the intervention take more credits and have higher GPAs in the subsequent semester.


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Maximilian D. Schmeiser & Christiana Stoddard & Carly Urban, Does Salient Financial Information Affect Academic Performance and Borrowing Behavior among College Students?, Board of Governors of the Federal Reserve System (U.S.), Finance and Economics Discussion Series 2015-75, 10 Sep 2015.
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Keywords: financial counseling; financial education; financial literacy; higher education; student loans
DOI: 10.17016/FEDS.2015.075
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