Our Assumptions


Education in general and Higher Education, in particular, is widely seen as an investment for future success. Since 2004 however, this investment comes at an increasingly expensive price tag. We have built READ on the basis of the following underlying assumptions:

 

1. Education is a promise, not a guarantee: As a mental good its economic value is derived from the ability of a person to apply it favorably. While education can lead the path to economic success, this might not always be the case.

 

2. The value perception of education dilutes over time: The correlation between the relevance of a degree and its economic value is diverging over time and as such the motivation to repay any associated cost decreases. The further away a person is from graduation and the lower the outstanding debt amount, the higher the default risk.

 

3. Debt can be psychologically straining: For as long as a person can pay the obligation in full and on time student debts are hassle-free. In challenging financial or personal situations, however, this might not be the case and the management of student loans will become increasingly painful given the time-consuming and bureaucratic process associated with student debt management, especially in case of default.


OUR CONCLUSIONS


1. People need to understand ‘the deal’ when they decide to get a degree and assess all possible options: Students should consider their personality treats, cognitive abilities, possible career prospects as well as the financial implications when making decisions about their future education and the way they finance it.

 

2. Repayment plans that include a savings plan change incentive: As the value perception of the degree dilutes over time, savings increase, and kick-in as an incentive to pay back any outstanding student debts. 

 

3. We need to help people and give them tools to manage their financial affairs better: We need to lower the hurdles and make the administration of student loans simple, and we need to provide guidance by making budgeting an easy task.

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