Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2026/1: Financial Sophistication and Interest-rate Choice in Norwegian Student Loans

Jean Paul Rabanal (), Philip Toney, Shuqi Wang () and Bernt Arne Odegaard
Additional contact information
Jean Paul Rabanal: University of Stavanger, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Philip Toney: Høgskolen på Vestlandet (HVL), Postal: Høgskolen på Vestlandet (HVL)
Shuqi Wang: University of Stavanger, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Bernt Arne Odegaard: University of Stavanger, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: We use data on student debt repayments for all Norwegian students to study how financial sophistication influences financial decisions. Specifically, we look at the choice between fixed and variable interest rates. Individuals can regularly choose between a fixed rate over selected horizons, or a default variable rate. We construct decision rules reflecting different levels of financial understanding, and investigate switching behavior. We find that borrowers with business and economics background are better at identifying when to switch to a fixed rate, in particular for the more (financially) sophisticated decision rules. The overall take-up of fixed rates is however surprisingly low, and hard to reconcile with rational decision-making.

Keywords: Household Finance; Financial Literacy; Fixed vs Floating; Student Debt

JEL-codes: G51; G53; I22

Language: English

39 pages, August 23, 2026

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