Thinking Patterns: An Exploratory Investigation of Student Perceptions of Costs and Benefits of College Loan Debt

Instead of a single attitude toward debt factor, we measure attitude along two dimensions: perceived costs and benefits. We then classify college students into four thinking patterns toward debt: "uninterested," "debt tolerant," "debt averse," and "trade-off."...

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Bibliographic Details
Published in:Journal of financial education 2015-07, Vol.41 (2), p.24-48
Main Authors: Nonis, Sarath A., Hudson, Gail I., Philhours, Melodie J., Hu, Xiankui
Format: Article
Language:English
Subjects:
Academic achievement
College students
Credit cards
Debt
EDUCATIONAL RESEARCH
Literacy
Loans
Net present value
Personal debt
Student costs
Student loans
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Summary:Instead of a single attitude toward debt factor, we measure attitude along two dimensions: perceived costs and benefits. We then classify college students into four thinking patterns toward debt: "uninterested," "debt tolerant," "debt averse," and "trade-off." The largest student segment falls into the "debt tolerant" group based on their perceptions of low costs and high benefits of college loan debt. These students also rank the lowest in debt literacy but highest in credit card misuse among the four groups. We find that the debt literacy among even college of business students is quite low, only around 62%. The low level of debt knowledge will hinder their ability to make informed financial decisions. How this information can be used to "close the loop" attesting to student learning as suggested by AACSB is also discussed.
ISSN:0093-3961
2332-421X