Are
student loans a burden or a boost? The National Bureau of Economic Research
(NBER) attempted to find out in a recent study.
The
study, summarized in a report on MarketWatch, focused on the financial-aid
notification letters sent to students at a community college. One randomly
assigned group received letters that listed their eligibility for grant and
scholarship aid, along with an offer to borrow $3,500-$4,500 in federally
subsidized student loans. The other group’s financial-aid letters offered “$0”
in federal loans.
Not
surprisingly, students in the first group “were 40% more likely to borrow than
their peers who received an offer of zero,” said the MarketWatch report.
However, it also turned out that these borrowers enrolled in more course
credits the following term, earned a higher grade-point average in those
courses, and transferred at a higher rate to four-year institutions.
In
short, the NBER study concluded, having access to federal loan funds enabled
and motivated these students to make faster progress in their higher education.
Students who had to rely on other means couldn’t afford to take as many classes
and were less likely to complete their studies.
“The
big takeaway from this paper is that restricting students’ access to federal
student loans, either through making the process of getting the loans more
complicated or more opaque or completely opting out of the federal loan
program, can harm students’ attainment and potentially make them worse off,”
said researcher Lesley Turner, an economics professor at the University of
Maryland.
