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Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection

Year: 2024
Type: article
Abstract: We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framingof downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific terms can increase demand for higher education insurance to potentially address risk for students with varying outcomes.
DOI: 10.17016/feds.2024.024
Authors: Sidhya Balakrishnan, Eric Bettinger, Michael S. Kofoed, Dubravka Ritter, Douglas A. Webber, Ege Aksu, Jonathan S. Hartley
Institutions: Jain Family Institute, National Bureau of Economic Research, Stanford University, IZA - Institute of Labor Economics, University of Tennessee at Knoxville, Federal Reserve Bank of Philadelphia, Federal Reserve, Federal Reserve Board of Governors, The Graduate Center, CUNY
Language: English
Subfield: Finance
Open Access status: diamond
OpenAlex ID: W4395051925
FWCI: 0.562
Cites: 45
Cited by: 2
Related to: 10