American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Closing the Gap: The Effect of Reducing Complexity and Uncertainty in College Pricing on the Choices of Low-Income Students
American Economic Review
vol. 111,
no. 6, June 2021
(pp. 1721–56)
Abstract
High-achieving, low-income students attend selective colleges at far lower rates than upper-income students with similar achievement. Behavioral biases, intensified by complexity and uncertainty in the admissions and aid process, may explain this gap. In a large-scale experiment we test an early commitment of free tuition at a flagship university. The intervention did not increase aid: rather, students were guaranteed before application the same grant aid that they would qualify for in expectation if admitted. The offer substantially increased application (68 percent versus 26 percent) and enrollment rates (27 percent versus 12 percent). The results suggest that uncertainty, present bias, and loss aversion loom large in students' college decisions.Citation
Dynarski, Susan, CJ Libassi, Katherine Michelmore, and Stephanie Owen. 2021. "Closing the Gap: The Effect of Reducing Complexity and Uncertainty in College Pricing on the Choices of Low-Income Students." American Economic Review, 111 (6): 1721–56. DOI: 10.1257/aer.20200451Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- I22 Educational Finance; Financial Aid
- I23 Higher Education; Research Institutions
- I24 Education and Inequality
- I28 Education: Government Policy