Student aversion to borrowing

Choice to go debt-free can limit enrollment options and hurt chances of graduation


The Washington-based Institute for Higher Education Policy and Excelencia in Education have released a new report that examines the characteristics of students who are less likely to borrow for post-secondary education.

According to the report, Student Aversion to Borrowing: Who Borrows and Who Doesn’t, students who are adverse to borrowing to finance their education include older, financially independent students who have delayed their enrollment, part-time students, and members of certain ethnic or immigrant groups.

While it might appear advantageous for these students not to borrow and accumulate student loan debt, there is a downside too. In some cases, aversion to borrowing may limit students’ post-secondary enrollment choices and/or negatively impact their chances of successfully completing a program.

The top 3 suggested reasons why students may choose not to borrow for education, even if they have substantial unmet financial need, are as follows:

  • Students may attend lower cost institutions or change their attendance pattern so that they face fewer expenses in a given semester and do not need to borrow.
  • Students may use other financial resources to pay college expenses and not have to borrow.
  • Students from certain racial/ethnic or immigrant groups may have a cultural or familial perspective on debt that encourages them not to borrow.


Student aversion to borrowing

  1. This study highlights some of the problems in studying debt aversion.

    Read those first two rationales for not borrowing again. If I weren’t *specifically looking* for evidence of debt aversion, I might be tempted to describe those two as thinking that education costs too much” (or, more technically, they likely believe they can get a better rate of return on a cheaper educational program). In other words, a lot of so-called debt aversion may just be price sensitivity. Use “price sensitivity” in a policy discussion and you get a very different response than you do if you use the term “debt aversion”.

    (to be clear, I’m not saying that all debt-aversion = price-sensitivity…I’m just making the point that studies like this make it very hard to distinguish between the two)

    The third point – about cultural attitudes to debt, is on the money, I think. But the issue is presumably whether or not this actually results in them having a different perspective on education. Many of them compensate for a reluctance to borrow by saving more, or receiving money from broader community networks rather than just the family (you see this pattern in a lot of developing countries, for instance – everyone on a street pitches in to help a kid through university).

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