Amanda Pallais, a Ph.D. Candidate in Economics at the Massachusetts Institute of Technology, is currently working on research about how small changes in how test score reports are sent to colleges can affect student behavior. Pallais kindly agreed to discuss her findings thus far in a guest post.
By Amanda Pallais
Picking the right colleges to apply to is a daunting challenge. Students must choose one of over 2^2,400 combinations of colleges (and that just includes four-year schools in the U.S.), while facing great uncertainty about the costs and benefits of attending each college. Even deciding how many schools to apply to is not easy. Students looking for a rule of thumb can find one in an unexpected place—the number of colleges to which they can send their standardized test scores for free.
I’ve been looking at one college entrance exam in particular, the ACT. The ACT is especially popular in the U.S. Midwest and more students actually take the ACT than the SAT each year. In the fall of 1997, the ACT Corporation increased the number of free score reports it provided from three to four; additional score reports still cost $6. While the difference in the cost of sending four score reports dropped by only $6, the student response was enormous.
As you can see from the two charts below, I find that before the change, over 70% of students sent their ACT scores to exactly three colleges, while less than 5% sent their scores to four. Afterwards, less than 10% of students sent three score reports and approximately 60% sent four. As a result, 23% of students sent an additional application. Over the same period, there was no similar change in the number of score reports sent by students taking the SAT.
Number of ACT Score Reports Sent
Number of SAT Score Reports Sent
What caused the large response to the fourth free score report? It was not the $6. If it were, students should be equally responsive to a $6 decrease in application fees. But I find there is no relationship between changes in a college’s application fees and in the number of applications it receives. Instead, students are likely reacting to an implicit rule of thumb about how many colleges to apply to. They may interpret the number of free score reports the ACT provides as an indication of the number of score reports it recommends sending. This is consistent with the results of other economists who have looked at choices of 401(k) and prescription drug plans.
The change in student behavior is not just an interesting artifact. It has real world consequences that can permanently affect these students. Sending an additional score report could have large benefits for low-income students in particular. I very conservatively estimate that by increasing the probability that a low-income student attends college and attends a selective college, sending an additional score report could increase her lifetime earnings by over $6,000. She might also be more likely to end up at a school that’s a better fit for her personally. All of this, because of a simple $6 change.
The paper that this post is based on is titled, “Why Not Apply? The Effect of Application Costs on College Applications for Low-Income Students.” The full version can be found here.