Paying the price of education:Perceptions of loans and the burden of debt

Nikki Johnston & Louise Ryk

"After students have exhausted scholarships, federal loans, and federal grants, an ever widening financial gaps exists-a gap between what students have and what they really need to go to college. That’s where private student loans from Astrive Student Loans come in.”

http://www.youtube.com/watch?v=_oavcYPd9vw

Who here has a student loan or a student line of credit?

Imagine your are entering college or university for the first time next year. What would be the costs and benefits that you would take into consideration when deciding whether or not to take out a student loan?

Education is becoming more expensiveThe methods of financing of this higher cost of

education vary and present a challenge for students and parents; for example, lengthy application

Thaler and Sunstein propose two nudges:FAFSA application to be combined with the tax-

return application – software packageTo avoid loans altogether, start college savings

accounts (“529 plans” in the US; RESPs in Canada)

“Understanding High School Student’s Willingness to Borrow to Pay for College Prices” by Laura W. Perna

Examines perceptions of student loans; determinants of financing post-secondary education

MethodologyFindings are assessed through:

student and familyschool and communityhigher educationthe broader social, economic and policy contexts

The state plays a limited role in shaping student perceptions of loans

Students in low-resource schools are debt averse

Some students in middle-resource schools are willing to borrow

Most students in high-resource schools are willing to borrow

Parental perceptions influence students in all cases

Students are generally uninformed

Primacy of Cost/Benefit Analysis Role of Habitus

More information is needed for low and middle-resource studentsTrained counselors and teachers Collaboration between high schools and

colleges and universitiesStudents should not simply be advised to take

out loans

Critique of Perna: policy implications are purely information based

Primacy of Cost/Benefit Analysis in decision making Debt averse vs. risk takersAffects of loans on academic performanceWhat are some of the ways that we can reduce

debt?Increasing accessibility – tuition issues, part-time

- i.e. QuebecIncentives for debt reduction – provincial retention

strategies