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Debt Aversion and the Demand for Loans for Postsecondary Education

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

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

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    Cited by:

    1. Eckel, Catherine & Johnson, Cathleen & Montmarquette, Claude, 2013. "Human capital investment by the poor: Informing policy with laboratory experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 224-239.
    2. Fabiola Saavedra & Mónica Ospina, 2014. "Decisions about Postsecondary Education, their returns in Colombia," DOCUMENTOS DE TRABAJO CIEF 012542, UNIVERSIDAD EAFIT.
    3. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
    4. Schleich, Joachim & Gassmann, Xavier & Faure, Corinne & Meissner, Thomas, 2016. "Making the implicit explicit: A look inside the implicit discount rate," Energy Policy, Elsevier, vol. 97(C), pages 321-331.
    5. Marco Castillo & Ragan Petrie & Maximo Torero, 2010. "On The Preferences Of Principals And Agents," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 266-273, April.
    6. Thomas Meissner, 2016. "Intertemporal consumption and debt aversion: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(2), pages 281-298, June.
    7. Harrison, Neil & Agnew, Steve & Serido, Joyce, 2015. "Attitudes to debt among indebted undergraduates: A cross-national exploratory factor analysis," Journal of Economic Psychology, Elsevier, vol. 46(C), pages 62-73.
    8. Juan Esteban Saavedra & Carlos Medina, 2012. "Formación para el Trabajo en Colombia," DOCUMENTOS CEDE 010315, UNIVERSIDAD DE LOS ANDES-CEDE.
    9. Arya, Shweta & Eckel, Catherine & Colin, Wichman, 2011. "Anatomy of the Credit Score," MPRA Paper 47783, University Library of Munich, Germany.
    10. Aurora Ortiz-Nuñez, 2014. "Attitudes Toward Risk And Socioeconomic Factors Related To Educational Loans," Contemporary Economic Policy, Western Economic Association International, vol. 32(4), pages 710-718, October.
    11. Burks, Stephen & Carpenter, Jeffrey & Götte, Lorenz & Rustichini, Aldo, 2012. "Which measures of time preference best predict outcomes: Evidence from a large-scale field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 308-320.
    12. Hernán Bejarano & Francisco Galarza, 2016. "Can cognitive skills and risk aversion explain inconsistent choices? An experiment," Working Papers 16-03, Centro de Investigación, Universidad del Pacífico.
    13. Fairley, Kim & Weitzel, Utz, 2017. "Ambiguity and risk measures in the lab and students’ real-life borrowing behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 85-98.

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