According to the Life Cycle/Permanent Income hypothesis, a college student should consume more than she has in income. People should smooth their consumption to keep it roughly constant. Therefore, a college student should take out loans and spend more than she makes.
According to the Life Cycle/Permanent Income hypothesis, consumers should take a long-term view of the resources at their disposal for current consumption. In other words, customers act as though they must adhere to a lifetime "budget" rather than a period-by-period one. The amount of anticipated long-term income is then regarded as the maximum amount of "permanent" revenue that can be spent without risk.
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