The field of behavioral economics has identified numerous settings where behavioral biases, such as procrastination, inattention, overconfidence and loss aversion, may contribute to the lack of take-up of an available benefit. In response, behavioral “nudges” have been proposed to help mitigate barriers to enrollment.
Nudges work by altering the framing of a decision, i.e. the choice architecture, in a way that does not affect the primary economic costs and incentives, but may nonetheless alter outcomes, largely via psychological channels. Settings where nudges have been leveraged to influence decisions include retirement savings default), energy conservation, and prescription drug choice.
A common feature of these nudges is that a number of steps involved in making a decision are streamlined, automated or the ultimate decision itself is set to some default. In many cases where apparently small transaction costs prevent agents from taking advantage of an available benefit, these nudges may help to overcome frictions in initial adoption. In addition, since the nudge eases some steps in the process, this may increase the likelihood that other steps are taken.
The federal Teacher Loan Forgiveness program provides student loan debt relief of either $5,000 or $17,500 to eligible teachers. To qualify, teachers must teach five consecutive years in a qualifying school or schools, which are defined by having more than 30 percent of students receiving free or reduced lunch.
This project includes a randomized controlled trial with 20,000 teachers in Michigan to study if particular “nudges” will influence whether teachers apply for the federal Teacher Loan Forgiveness program.
The research project runs through July 2017.
How is the Study Funded?
The study is funded by a grant from the Alfred P. Sloan Foundation.
Damon Jones received his Ph.D. in economics at UC Berkeley in 2009. He is an assistant professor at the University of Chicago, Harris School of Public Policy and a Faculty Research Fellow at NBER. His research areas include public finance, household financial decision-making and behavioral economics. He has prior experience in conducting field experiments aimed at testing theories of behavioral economics, including work on the take-up of public benefits that has been published in The American Economic Journal: Applied Economics. In 2015, he was featured in the Ideas42 Directory of Academic Experts in Behavioral Science.
Benjamin J. Keys received his Ph.D. in economics from the University of Michigan in 2009. He is an assistant professor at the University of Chicago, Harris School of Public Policy and co-director of the Kreisman Initiative on Housing Law and Policy at the University of Chicago. His research areas include household finance, labor economics and urban economics, and are of particular relevance to the current project, where teachers are considering a benefit that affects the stock of debt and the household balance sheet. He has related work on the failure of homeowners to refinance mortgages, which received the CoreLogic Academic Research Council Excellence Award in 2014.