Debt Aversion and the Demand for Loans for Post-Secondary Education

The authors report the results of an experiment designed to measure the impact of different forms of subsidies on the demand for post-secondary 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 post-secondary education. Using survey measures, the authors find no evidence that debt aversion is an important barrier to investment in post-secondary education. In addition, subjects with experience carrying and managing debt are more willing than others to take on additional debt to finance post-secondary education