Student Loan Dissatisfaction: A Prospect Theory Analysis
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2024-07-10
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en
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Abstract
The design of the financial system for Dutch students has endured several switches in the past decade. This has ultimately led to a lot of dissatisfaction among students. Currently, students strongly desire that the government lowers the interest rate after its sharp increase last year. What if there is a possibility to lower their interest rate, without the government suffering from detrimental losses? This research poses to uncover the risk preferences of Dutch students in order to discover whether de-fixing the interest rate on student loans is a feasible intervention. This is studied by testing the certainty effect, known from prospect theory, as well as several influences on this effect. Using an experiment among mainly Dutch students and graduates, risk preferences in the student loan domain are exploratively studied. The analysis of both an OLS and an RI model have led to mainly insignificant results, indicating that the certainty effect does not play a role in the sample studied and the de-fixing of interest rates might be feasible. This study offers a valuable starting point for investigating risk preferences in the student loan domain and offers ample possibilities for future research.
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Faculteit der Managementwetenschappen