Fostering Adult Education: A Laboratory Experiment on the Efficient Use of Loans, Grants, and Saving Incentives

Summary

In 2002 the Canada Student Loans Program commissioned the Social Research and Demonstration Corporation (SRDC) to conduct an economic experiment to inform policy development with respect to student financial assistance. This paper examines data collected between May 2002 and March 2003 from nearly 900 participants in 13 municipalities. Analysis indicates that personal decisions about education are influenced by loan aversion, loss aversion, debt aversion, and debt-seeking behaviour. However, there is no evidence that fear of failure plays a role. Overall, and unsurprisingly, participants chose grants and matching grants over loans. The offer of financial support for part-time study increased the number of participants 25 years of age and older that chose to improve their education, but did not affect the choices of younger participants. However, evidence does indicate that younger people who take part in labour-market information sessions are more likely to make choices that involve improving their education.

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