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College students with significant financial aid in the form of loans, it turns out, aren’t so generous toward their alma maters. As alumni they’re unlikely to give back, and when they do they give smaller amounts. This isn’t, as one might suspect, because they can’t afford too; it appears to be because the loans just make them annoyed at their institutions.
According to a paper by Jonathan Meer and Harvey Rosen:
The mere fact of taking out a student loan decreases the probability that an individual will contribute to the university as an alumnus. Further, individuals who take out large student loans make smaller contributions as alumni, conditional on making a gift. Taking advantage of correlates of income that are in our data set, we argue that this negative impact is unlikely to be due to the fact that alumni who took out loans have relatively low disposable incomes.
The researchers investigated students receiving scholarships, loans, or campus jobs as a form of financial aid. They discovered that, while receiving any kind of financial aid reduced alumni giving (which is to be expected) it was student loans that reduced alumni contributions the most.
This is, the researchers explained, unlikely to be due to the fact that financial aid recipients in general might have less money. As the writers point out, contributions don’t seem to depend on graduates actual disposable income; the graduates with loans don’t contribute more money after they’re been out longer and have presumably paid off their debt.
Why is this? Well the researches don’t really know the answer, but they’ve got an idea:
A final possibility is that there is an “annoyance effect” associated with having to pay back loans. Given that the results do not seem to be driven by income or ties to the majority social culture, it is difficult to put forward an explanation other than this psychological burden, mentioned above. That is, loan recipients resent the fact that their aid came in the form of loans rather than grants, and consequently, give less….
Makes sense.
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Mark L on February 29, 2012 9:46 PM:
After taking out nearly $200k in loans for grad school I can attest that I only donated a few nasty comments when fundraisers calling on behalf of the university asked for money around Christmas.
Snarki, child of Loki on March 01, 2012 7:45 AM:
If I take out a car loan from the dealership to buy a new car, why in hell should I be "grateful" to the dealership?
I might be resentful, if it feels like I got ripped off with an inferior-quality car, or if the terms of the loan are punative, but even if it's a "0%" loan, there's no REASON for gratitude: they made the loan because it's in their economic best interest.
On the other hand, if the car dealer says "hey, I know that you and the missus are having a tough time with the kids right now. How about we upgrade you to a bit larger car, same price?" THEN I'll be eternally grateful, and come back for service and new vehicles, over and over.
Nate on March 02, 2012 12:05 PM:
I can attest that I'm not donating anything until my loans are paid off. However, I wasn't on any sort of scholarship either. I wonder if receiving a scholarship from alumni donated funds increases donations.