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Student Loan Decision Making: Experience as an Anchor

Author

Listed:
  • Nilton Porto

    (University of Rhode Island)

  • Soo Hyun Cho

    (California State University, Long Beach)

  • Michael Gutter

    (University of Florida)

Abstract

The purpose of study is to examine the association between one's past borrowing experience and borrowing decisions in a hypothetical survey scenario. A total of 1928 responses from an online survey panel were analyzed, with a built-in anchoring question. Using the concept of anchoring bias as a reference point, survey participants were shown a hypothetical scenario regarding college attendance and asked two relevant questions: is it wise to attend college and how much student loans one should take out to attend college. Results indicated that the more one borrowed personally, the more one is likely to think a higher amount being borrowed by a hypothetical high-school graduate is prudent. This connection between experience and present advice can be described as a novel anchoring effect.

Suggested Citation

  • Nilton Porto & Soo Hyun Cho & Michael Gutter, 2021. "Student Loan Decision Making: Experience as an Anchor," Journal of Family and Economic Issues, Springer, vol. 42(4), pages 773-784, December.
    • Handle: RePEc:kap:jfamec:v:42:y:2021:i:4:d:10.1007_s10834-021-09773-5
    DOI: 10.1007/s10834-021-09773-5
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