Willingness to Pay for Post-secondary Education Among Under-represented Groups
Start-end date: May 2007 - December 2009
Sponsor: Canada Millennium Scholarship Foundation
Numerous rationales have been presented to support the continued expansion and broadening of participation in post-secondary education (PSE). Government occupational projections suggest that future jobs will overwhelmingly require candidates with some form of PSE. However, in twenty years from now, demographic trends point to a substantially shallower pool of Canadians of post-secondary age.
The Willingness to Borrow study used experimentally-derived indicators of price sensitivity and loan aversion to investigate the demand of high school students for PSE. It focused on student groups that have been traditionally under-represented in PSE, such as those from low-income backgrounds, families with no history of higher education, and First Nations. Participants from 12 schools in
4 provinces were either in their final year of high school or their first year of CEGEP (collège d’enseignement général et professionnel).
To reveal their preferences for investing in PSE, participants had to choose between various forms of financing for full-time PSE (loans, grants, or loan/grant hybrids up to $4,000) and significant but smaller amounts of money (up to $700). They were informed that, at the end of the session, they would be compensated for one of their choices, selected at random.
The price of PSE subsidies was experimentally manipulated by varying the amounts of immediate cash that participants had to give up when choosing different amounts and types of financial aid. Price sensitivity was defined as the rate at which financial aid choice declined with increases in price. An indicator of loan aversion was derived by exploiting the fact that some choices offered participants stand-alone grants, while others offered grants of the same amount in combination with optional loans. Participants were defined as loan averse whenever they chose stand-alone grants.
Participants and their parents also completed surveys, allowing linkages between price sensitivity and loan aversion to a series of individual characteristics. In general, the study shows that demand for financial aid declined with price. This was more evident for underrepresented groups who also showed a greater tendency to be loan averse. Differences in price sensitivity and loan aversion were partially accounted for by grades and ability (numeracy) scores, but factors such as discount rate and perceived cost of PSE were also important.
The Willingness to Borrow study was conducted in collaboration with the Centre interuniversitaire en analyse des organisations (CIRANO) and funded by the Canadian Millennium Scholarship Foundation.
Read the full report.
Read the executive summary.
Read Appendix A-Choices.
Read Appendix B-Surveys.
Read the Johnson, Montmarquette, and Voyer paper.