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Loan Aversion among Canadian High School Students

  • Cathleen Johnson
  • Claude Montmarquette

Evidence is presented on whether the willingness to borrow for education varies significantly among some at-risk students: low SES levels, First Nations, and first generation students. 1248 students participated in a survey, a numeracy assessment and took part in experimental decisions. During these sessions, students were presented with a series of paid binary decisions: bursaries vs. cash, loans for postsecondary education studies vs. cash, intertemporal decisions and risky decisions. The paid binary decisions involved trade-offs between cash and various types of student financial aid, allowing us to generate a cost per dollar of educational financing (grants, loans, mixtures of loans and grants). Prices for the various types of educational financing overlapped substantially in order to more clearly distinguish the impact of loan aversion on the decision to take up financial assistance to pursue PSE. Results show that several factors influence the subjects' decisions about education financing but the most prominent influence was the price of educational subsidies. Participants were marginally sensitive to the form of financing (grant or loan), with no evidence of systematic loan aversion being detected. Cette étude montre que la volonté d'emprunter pour s'instruire varie considérablement chez certains étudiants issus de milieu socio-économique faible, des Premières nations, et les étudiants de première génération. 1248 étudiants ont participé à une enquête, une évaluation de leur niveau de connaissances numériques et ont pris part à des décisions expérimentales. Pendant ces séances, les étudiants ont été confrontés à une série de décisions binaires rémunérées : bourses vs dollars, prêts d'études pour le postsecondaire vs dollars, des décisions intertemporelles et des décisions risquées. Les décisions binaires rémunérées impliquant un arbitrage entre des dollars et divers types d'aide financière, nous ont permis de générer un coût par dollar du financement de l'éducation (bourses, prêts, mélanges de prêts et de bourses). Les prix pour les différents types de financement de l'éducation se chevauchent de manière substantielle pour permettre de distinguer clairement l'impact de l'aversion pour les prêts sur la décision de prendre ou non l'option d'une aide financière pour poursuivre des études postsecondaires. Les résultats montrent que plusieurs facteurs influencent les décisions des sujets sur le financement de leur éducation, mais l'influence la plus importante est le prix en dollars des subventions à l'éducation. Les participants ont été légèrement influencés par la forme de financement (subvention ou prêt), mais aucune preuve d'aversion pour les prêts n'a été décelée.

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File URL: http://www.cirano.qc.ca/files/publications/2011s-67.pdf
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Paper provided by CIRANO in its series CIRANO Working Papers with number 2011s-67.

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Length: 49 pages
Date of creation: 01 Nov 2011
Date of revision:
Handle: RePEc:cir:cirwor:2011s-67
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  1. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
  2. Frenette, Marc, 2007. "Why Are Youth from Lower-income Families Less Likely to Attend University? Evidence from Academic Abilities, Parental Influences, and Financial Constraints," Analytical Studies Branch Research Paper Series 2007295e, Statistics Canada, Analytical Studies Branch.
  3. Lorraine Dearden & Leslie McGranahan & Barbara Sianesi, 2004. "The role of credit constraints in educational choices: evidence from NCDS and BCS70," LSE Research Online Documents on Economics 19447, London School of Economics and Political Science, LSE Library.
  4. Corak, Miles & Lipps, Garth & Zhao, John, 2004. "Family Income and Participation in Post-Secondary Education," IZA Discussion Papers 977, Institute for the Study of Labor (IZA).
  5. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
  6. 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.
  7. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  8. Claude Montmarquette & Nathalie Viennot-Briot & Marcel Dagenais, 2007. "Dropout, School Performance, and Working while in School," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 752-760, November.
  9. Mayer, Francine & Dupuy, Richard & Morissette, Rene, 2000. "Rural Youth: Stayers, Leavers and Return Migrants," Analytical Studies Branch Research Paper Series 2000152e, Statistics Canada, Analytical Studies Branch.
  10. Frenette, Marc, 2007. "Est-ce que les universites profitent a la population locale de jeunes? Resultats provenant de la frequentation des universites et des colleges, et des gains des diplomes suivant la creation d'une nouv," Direction des etudes analytiques : documents de recherche 2006283f, Statistics Canada, Direction des etudes analytiques.
  11. Catherine Eckel & Cathleen Johnson & Claude Montmarquette, . "Will the Working Poor Invest in Human Capital? A Laboratory Experiment," CIRANO Project Reports 2002rp-08, CIRANO.
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