STUDENT DEBT IN THE UK AND U.S.

Student Debt in the UK and U.S.

Student Debt In The UK

Introduction

Research into how students manage their ethical finances has been explored in the past both within the UK and US. In the UK and US, interest has been particularly evident over the past 10 years, as changes to student funding including the phasing out of maintenance grants, and the introduction of student loans and tuition fees led to the need for higher parental financial contributions and higher levels of student debt (Lewis, 2006).

This paper studies the performance of UK and US ethical investment funds over the recent period from January 2008 to 2003. These funds are growing in importance throughout UK although in some countries such as Sweden they have been in existence since 1965. This fast growing area of European equity investment, involves investment funds selecting securities according to ethical and environmental criteria. The amount of resources which are available for investment has risen dramatically. For example according to Ethical Investment Research Service (EIRiS) there were 44 ethical funds in the UK with £2.8 billion under management in January 2000 compared to £0.67 billion in July 2004 (Social Investment Forum, 2006).

Purpose of the study

There have been a number of different surveys of student debt since the introduction of student loans. These did not all use the same definition of debt or cover the same types of students and they tended to ask respondents different supplementary questions and hence give different results and analysis (Waxler, 2004). All look at the full range of student debt, Student Loans, overdrafts, credit card debt etc. The main distinction is in whether they ask current students about debt, or recent graduates.

Objectives of the study

The objectives of the paper are set as follows:

Establish a representative “vice fund” for the UK and the US respectively.

Determine the risk and return profile for a selected range of UK and US ethical funds and the “vice funds“ over the period of 2008-2003.

Estimate the risk-adjusted return of the investment funds over the named period.

In portfolio management, evaluate both investment fund types' exposure to the respective equity markets in the UK and US over the named period.

Literature

Ethical fund” or “vice funds”

The term “ethical fund” or “vice funds” which is widely used in the academic and professional literature actually includes investments with a diverse set of aims and objectives. Some funds do not hold shares in firms which operate in the alcohol, pornography and tobacco industries, while others forbid the purchase of equities of firms with poor environmental track records. Whatever these differences, this paper adopts the usual convention of defining those funds which employ non-financial ethical criteria for security selection as ethical funds because some companies are excluded from their portfolios for ethical reasons (Sparkes, 2006).

Only a few published studies have investigated the financial performance of ethical funds. These studies have focused primarily on the UK and the US, involved small sample sizes and considered relatively short time spans (Social ...