STUDENT LOAN POLICIES

Student Loan Policies

Student Loan Policies

Introduction

The main aim of this essay is to find the individual specific attitudes which may influence loan repayment behavior and the association of the variables in influencing the final behavior. The study reveals that 'anxiety' and 'income' are the most important variables associated very closely with defaulter behavior, followed by loan usage and power and prestige score in that order. The variables suggested above can be administered to the prospective customers and significant insights can be obtained regarding their loan repayment behavior. The model presented is a demonstration of the ability of the quantitative tools in ascertaining the default behavior.

However, the aim is not only to classify, but also to understand the root of the defaulter behavior. Therefore, the study probes deeper into the attitude and perception variables of consumers who avail loan facilities. The study, based on the customers of an MNC bank1, using a survey in two metropolitan cities in America, suggests that the constructs of personality traits, such as money attitudes, power-prestige and anxiety, actually enhance the intention and actual usage of loan facility, and that the same can be the predictors of default behavior at a significant level. The results and the model developed can be used as the basis for decision making while processing loans (Breuer & Jandacka, 2008).

Discussion And Analysis

One concern, which is inherent, imminent, and perhaps the most important in financing business, is how to handle the defaulting customers. Since it is always better if one can identify a potential defaulter in advance, there exists a need for a mechanism to identify the potential defaulters, i.e., a predicting model. The existing literature suggests various quantitative and qualitative models to assess the default behavior; however, almost all of them are built upon some broad financial indicators. These indicators include ...