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Student loans, spending, and parental transfers: insights from a nudge in student loan policy in the Netherlands
Been,Jim Knoef,Marike
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.
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Date
2023-10
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Keywords
Student loans, Quasi-experiment, Parental transfers, Consumption, Academic performance, C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models, D15 - Intertemporal Household Choice; Life Cycle Models and Saving, H52 - Government Expenditures and Education, I23 - Higher Education ; Research Institutions, I28 - Government Policy, SDG 4 - Quality Education
Citation
Been, J & Knoef, M 2023, 'Student loans, spending, and parental transfers: insights from a nudge in student loan policy in the Netherlands', Economics of Education Review, vol. 96, 102457. https://doi.org/10.1016/j.econedurev.2023.102457