Tuesday, November 23, 2010

Student Loans and Behavioral Economics Continued

Kelli Space graduated from Northeastern last year with $200,000 in debt. With 4 years of tuition, room and board, a semester abroad that doesn't seem unbelievable. She is now asking for donations at a website

I don't think her story is completely uncommon. I wonder why she chose to go to Northeastern over a state school, which would have been half the cost? Also is there a policy that could prevent people from making this choice? Finally should a policy exist?

In a behavioral sense we want to ask if Kelli exhibit awesome stupidity, or made a rational choice.

Although this paper by Rothestein and Rouse suggests it might not be that bad, if higher loans cause people to try to make more money.

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