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Educational loans and attitudes towards risk

Author

Listed:
  • Sarah Brown

    (Department of Economics, The University of Sheffield)

  • Aurora Ortiz-Núñez

    (Department of Economics, The University of Sheffield)

  • Karl Taylor

    (Department of Economics, The University of Sheffield)

Abstract

We explore the relationship between willingness to take financial risk and the probability of taking out a loan for educational purposes as well as the influence of risk attitudes on the size of the loan using data drawn from the U.S. Survey of Consumer Finances. The findings suggest a positive relationship between individuals’ willingness to take financial risk and the probability of taking out a loan for educational purposes. Similarly, individuals’ willingness to take financial risk appears to be an important determinant of the size of the educational loan. The findings suggest that non-white individuals and individuals from less wealthy backgrounds are less likely to finance education through loans which could potentially increase inequalities in education and income if such individuals are deterred from investing in human capital.

Suggested Citation

  • Sarah Brown & Aurora Ortiz-Núñez & Karl Taylor, 2011. "Educational loans and attitudes towards risk," Working Papers 2011010, The University of Sheffield, Department of Economics, revised Apr 2011.
    • Handle: RePEc:shf:wpaper:2011010
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    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_010.html
    File Function: First version, 2011
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    More about this item

    Keywords

    Educational loan; Risk aversion;

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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