Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Within five years of leaving school, 25% of student loan borrowers default on required minimum payments. These defaults are costly: they add to interest and penalties on loans and lower credit scores, which limits access to future credit and can adversely affect job prospects. We ask why so few student loan borrowers enroll in Income Driven Repayment (IDR) plans, which insure against default caused by low earnings. To do so we run an incentivized laboratory experiment using a facsimile of the government’s Student Loan Exit Counseling website. We test the roles information complexity, uncertainty about earnings, and the default option play. We find that switching the default option from the Standard plan with fixed minimum payments to an IDR with income-contingent minimum payments, and providing good information about earnings, can dramatically decrease choice of the risky Standard plan.