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Debt Aversion and the Demand for Loans for Postsecondary Education

Listed author(s):
  • Catherine C. Eckel

    (University of Texas at Dallas)

  • Cathleen Johnson

    (Center for Interuniversity Research and Analysis on Organizations (CIRANO) and University of Arizona)

  • Claude Montmarquette

    (Center for Interuniversity Research and Analysis on Organizations (CIRANO) and University of Montreal)

  • Christian Rojas

    (University of Massachusetts Amherst)

The authors report the results of an experiment designed to measure the impact of different forms of subsidies on the demand for postsecondary education financing among a sample of adults ages 18–55 in Canada. The experiment presents subjects with a series of choices involving trade-offs between cash payments and grants or loans earmarked for full or part-time education. In addition, the experiment includes experimental measures of time and risk preferences, and an extensive survey of experience and attitudes. This article focuses on the role of a person's attitudes toward debt (debt aversion) and experience with debt (debt use) in the decision to take up subsidized loans for postsecondary education. Using survey measures, the authors find no evidence that debt aversion is an important barrier to investment in postsecondary education. In addition, subjects with experience carrying and managing debt are more willing than others to take on additional debt to finance postsecondary education.

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Article provided by in its journal Public Finance Review.

Volume (Year): 35 (2007)
Issue (Month): 2 (March)
Pages: 233-262

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Handle: RePEc:sae:pubfin:v:35:y:2007:i:2:p:233-262
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