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How Low Income Expectations Affect Student Loan Repayment Plan Choice: Survey Evidence from College Seniors

Principal Investigator(s): View help for Principal Investigator(s) Joshua Brownstein, Michigan State University; Scott Imberman, Michigan State University

Version: View help for Version V2

Name	File Type	Size	Last Modified
Change in Income Expectations Change in Repayment Plan Choice.do	text/plain	3.5 KB	04/18/2023 11:14:AM
Compare Income Expectations to Major Specific Income.do	text/plain	1.1 KB	04/18/2023 11:14:AM
Create or Rename Variables for Survey Data Do File.do	text/plain	28.7 KB	04/18/2023 11:14:AM
Description of Variables.docx	application/vnd.openxmlformats-officedocument.wordprocessingml.document	19 KB	04/19/2023 08:00:AM
Difference in Proability of Earning 30k to 60k.do	text/plain	1.2 KB	04/18/2023 11:14:AM
Final Survey Data after Create or Rename Variables.dta	application/x-stata-dta	1.9 MB	04/18/2023 11:13:AM
Final_Survey_Data.csv	text/csv	620 KB	04/18/2023 11:13:AM
Heterogenity by Having Student Loans.do	text/plain	11.2 KB	04/18/2023 11:15:AM
Heterogenity by Income of Major.do	text/plain	10.6 KB	04/18/2023 11:14:AM
Heterogenity by Initial Plan Choice.do	text/plain	9.1 KB	04/18/2023 11:15:AM

Project Citation:

Brownstein, Joshua, and Imberman, Scott. How Low Income Expectations Affect Student Loan Repayment Plan Choice: Survey Evidence from College Seniors. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-04-19. https://doi.org/10.3886/E186081V2

Project Description

Summary: Income-driven repayment plans lower required payments for student loan borrowers when their income decreases. This helps to reduce student loan defaults. Despite universal availability, only a minority of student loan borrowers in the U.S. are in an income-driven repayment plan. In this study, I test whether a student’s choice of repayment plan is related to their expectations of earning a low income. Using an information experiment in a web survey, I create two groups of college seniors with an exogenous difference in low-income expectations. I find that respondents who see the major specific income information believe they, on average, have a higher probability of earning a low income. However, those respondents are not any more likely to choose the income-driven repayment plan. I conclude that students’ repayment plan preferences are not strongly related to their expectations of earning a low income. This may be due to students caring about things other than minimizing monthly payments when choosing a repayment plan.

Funding Sources: National Science Foundation (2049358)

Scope of Project

Subject Terms: Student Loan Repayment; Income Expectations; College Students

Collection Date(s): 10/19/2021 – 10/27/2021 (A link to the web survey was first emailed to students on 2021-10-19. I closed the survey on 2021-10-27)

Universe: Undergraduate Seniors at Michigan State University

Data Type(s): survey data

Methodology

Response Rate: 22.6% (1,581 completed surveys out of 7,000 students emailed the survey link)

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