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Educational loans and attitudes towards risk

  • 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)

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.

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File Function: First version, 2011
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Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011010.

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Length: 26 pages
Date of creation: Apr 2011
Date of revision: Apr 2011
Handle: RePEc:shf:wpaper:2011010
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