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The lack of loan aversion among Canadian high school students

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  • Cathleen Johnson
  • Claude Montmarquette

Abstract

Evidence is presented on the factors that influence take-up for postsecondary education financing (loans or grants) for high school students. Results show several factors influence the students' decisions about taking loans or grants but the most prominent influence was the price of educational subsidy. A total of 1,248 high school students across Canada participated. Prices for the grants and loans overlapped substantially in order to more clearly distinguish the impact of loan aversion on the decision to take up financial assistance to pursue PSE. The study featured paid experimental decisions (ranging from $25 to $700 in cash and from $500 to $4,000 in education financing), a numeracy assessment, a student survey and a parental telephone survey. The targeted sample included at-risk high school students: low SES levels, First Nations and first generation students. Participants were marginally sensitive to the form of financing (grant or loan), with no evidence of systematic loan aversion being detected.

Suggested Citation

  • Cathleen Johnson & Claude Montmarquette, 2015. "The lack of loan aversion among Canadian high school students," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 585-611, May.
    • Handle: RePEc:cje:issued:v:48:y:2015:i:2:p:585-611
    DOI: 10.1111/caje.12137
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    References listed on IDEAS

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    1. Catherine C. Eckel & Cathleen Johnson & Claude Montmarquette & Christian Rojas, 2007. "Debt Aversion and the Demand for Loans for Postsecondary Education," Public Finance Review, , vol. 35(2), pages 233-262, March.
    2. Catherine C. Eckel & Philip J. Grossman, 2002. "Sex Differences and Statistical Stereotyping in Attitudes Toward Financial Risk," Monash Economics Working Papers archive-03, Monash University, Department of Economics.
    3. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
    4. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    5. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    6. Catherine Eckel & Cathleen Johnson & Claude Montmarquette, 2002. "Will the Working Poor Invest in Human Capital? A Laboratory Experiment," CIRANO Project Reports 2002rp-08, CIRANO.
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    Cited by:

    1. Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2021. "Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 361-395.
    2. Belzil, Christian & Sidibé, Modibo, 2016. "Internal and External Validity of Experimental Risk and Time Preferences," IZA Discussion Papers 10348, Institute of Labor Economics (IZA).
    3. Christian Belzil & Jörgen Hansen & Julie Pernaudet, 2024. "Les déterminants cognitifs et non-cognitifs du choix de filière et leur impact sur la phase initiale du cycle professionnel," CIRANO Project Reports 2024rp-06, CIRANO.
    4. Claude Montmarquette & Nathalie Viennot-Briot, 2019. "The Gamma Factors and the Value of Financial Advice," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 387-411, May.
    5. Christian Belzil & Julie Pernaudet, 2023. "Les effets à court et moyen terme du soutien financier aux étudiants au Québec et dans le reste du Canada," CIRANO Project Reports 2023rp-15, CIRANO.

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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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