Rational choice theory applied to higher education loans and post graduate employment: A quantitative study



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With increased questioning about the value of obtaining a college education based on increased costs of attendance, now the second largest investment for a family behind the purchase of a home, it has become vital that students are properly informed in their decision making process when attending college and taking out student loans. The purpose of this quantitative study is to understand how prior information influences student’s decision making when deciding to attend college and take on debt. Rational Choice Theory will be applied to data extracted from the Education Longitudinal Study (ELS: 2002) from the National Center for Education Statistics (NCES). Research questions focus on the relationship between loan amounts and career goals in high school, expectations of career employment vs. outcome after graduation, and the importance of being successful in work. All research questions will be analyzed controlling for student variables of sex, race, socio-economic status, significance of prior skills training, college property attendance and career academy enrollment. A logistic regression will be used to analyze the data with predicted probabilities provided for ease in interpretation. Data will be nested by college state attendance to account for any influence of differing state policies, funding and initiatives that may influence outcomes. It was found that a student’s current job at age 30 vs. their expected job in the baseline survey, is statistically significant in correlation with loan amounts, were 22% of students do not meet their prior job expectations. Findings also showed that loan amounts have a positive significance for increased loan amounts in Black, female and 4-year institution students.



Student loans, Rational choice theory, Higher education, ELS 2002