Influencing the Student Consumer: Research into the Effects of Introducing Variable Interest Rates on Tuition Loans

Joyce, F. (2018) Influencing the Student Consumer: Research into the Effects of Introducing Variable Interest Rates on Tuition Loans. Undergraduate theses, University of Chichester.

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This research paper aimed to answer the question whether, under the current
system of funding for higher education, introducing variable interest rates on tuition loans
would inform and influence the prospective student. These rates would be dependent on
the financial outcomes expected from each course. For example, the rate applied to a STEM
course would, under this proposal, be less than that of an arts and humanities. This is due to
the expectation of the STEM student entering a more prosperous career and therefore has a
greater chance of repaying their loan in full, therefore being less of a burden on the
taxpayer. The hypothesis of this paper is that introducing variable rates would influence
prospective students into considering another course, one which has a greater chance of
yielding a greater income for that individual. The reason this proposal has been put forward
in two-fold. Firstly, current methods of communicating information to the student is poor
and, as this paper will go into detail, can mislead the prospective students. Students often
rely on the information of such organisations as the National Student Survey, which gathers
data by asking third-year students how the felt about their course. This serves very little
purpose in the rational decision-making of the consumer student. Therefore, introducing a
clear economic signal could be far more beneficial to the student. This assumes students are
entering higher education to primarily maximise their future earnings in their chosen career.
The secondary reason for conducting this research concerns the taxpayer. Students
who are more likely to borrow £27,000 at a low, uniformed rate of 6.1% (as of April 2018)
are also more likely to default on their tuition debt. This leaves the taxpayer to cover those
outstanding, unpaid loans, causing financial stress on the UK budget. This paper will conduct
research into whether interest rates can be adjusted to influence students to undertake a
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STEM course instead of an arts and humanities course. This would benefit the student, as
the information displayed through interest rates would allow for the individual to make a
more informed choice, and also the taxpayer who would have to contribute less to paying
off outstanding loans.

Publication Type: Theses (Undergraduate)
Subjects: J Political Science > JF Political institutions (General)
Divisions: Academic Areas > Institute of Arts and Humanities > History
Student Research > Undergraduate
Depositing User: Gail Graffham
Date Deposited: 07 Sep 2018 13:04
Last Modified: 07 Sep 2018 13:04

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