Jean Paul Rabanal, Philip Toney, Shuqi Wang and Bernt Arne Ødegaard
Aug 2026.
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