ERIC Number: ED672103
Record Type: Non-Journal
Publication Date: 2022-Jul
Pages: 46
Abstractor: As Provided
ISBN: N/A
ISSN: N/A
EISSN: N/A
Available Date: 0000-00-00
Student Selection into an Income Share Agreement. EdWorkingPaper No. 22-610
Kevin J. Mumford
Annenberg Institute for School Reform at Brown University
Financing college expenses through an income share agreement (ISA) is an arrangement where the student agrees to pay a fixed percentage of future earned income for a designated period of time in exchange for college funding. Using administrative and survey data for all eligible applicants to a university ISA program, I estimate the adverse selection into the ISA and provide preliminary estimates of the moral hazard for ISA participants. Identification of adverse selection comes from being able to observe the full set of eligible students who apply to the program. There is evidence of selection on the offered income share rate (which is determined by the student's major) as well as on parent characteristics, though not parent income. Surprisingly, there is no evidence of adverse selection on student ability as measured by SAT score and college grades. I find no differential selection on other student characteristics including demographics and measures of debt aversion, risk aversion, and time preference. Controlling for observable factors, ISA participation increases the likelihood of college graduation by 3 percentage points and decreases starting salary by $5,000 on average. [Additional funding for this report was received from the Purdue Research Foundation.]
Descriptors: Admission Criteria, College Students, Income Contingent Loans, Paying for College, Majors (Students), Family Income, Student Characteristics, College Entrance Examinations, Scores, Debt (Financial), Graduation, Probability, Salaries, Risk
Annenberg Institute for School Reform at Brown University. Brown University Box 1985, Providence, RI 02912. Tel: 401-863-7990; Fax: 401-863-1290; e-mail: annenberg@brown.edu; Web site: https://annenberg.brown.edu/
Publication Type: Reports - Research
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: Searle Freedom Trust
Authoring Institution: Annenberg Institute for School Reform at Brown University
Identifiers - Assessments and Surveys: SAT (College Admission Test)
Grant or Contract Numbers: N/A
Author Affiliations: N/A