Student borrowers earn more credits, better grades


Student borrowers earn more credits, better grades

Being offered federal loans increases academic and long-term success for community college attendees

November 8, 2018—Student loan debt is often characterized as a national crisis for borrowers struggling to pay back balances. But until now, little has been known about how student borrowing impacts educational outcomes such as credits earned and grade point averages (GPAs). Is student borrowing necessarily bad? In a new article for Education Next, Benjamin M. Marx of the University of Illinois at Urbana-Champaign and Lesley J. Turner of the University of Maryland report the first causal effects of loans on student outcomes, finding that eligible students who were offered federal loans through their community college earned 3.7 additional credits and raised their GPAs by more than half a letter grade. A year later, borrowers were 11 percentage points more likely to have transferred to a four-year public institution than those who were not offered student loans.

Through their financial aid offer letters, community colleges have the discretion to offer students the full loan amount for which they are eligible, a portion of that, or zero loan dollars. Marx and Turner used this common discretionary practice to measure the impact of such offers on both borrowing decisions and subsequent educational outcomes at a large community college during the 2015-16 academic year. They randomly divided students into two groups of approximately 10,000 students with each group receiving a different financial-aid award letter. Students in the loan-offer treatment group who were eligible to borrow received a loan offer of either $3,500 or $4,500 in their award letter (called “nonzero” offers). All loan-eligible students assigned to the control group received financial-aid letters that either listed $0 loan offers or did not mention student loans. These offer letters did not impact students’ eligibility for federal student loans.

Among the key findings:

Students offered loans were more likely to borrow. Some 30 percent of students in the loan-offer group borrowed, compared to 23 percent of students in the control group. Loan-offer group members borrowed $1,374, on average, approximately $280 (26 percent) more than the $1,097 average for control-group members.

Students who borrowed as a result of a loan offer signed up for more classes and progressed further in school. On average, students in the loan-offer group who borrowed attempted 2.5 credits more than comparable students in the control group and earned 3.7 credits more during the 2015–16 academic year.

Students who borrowed earned better grades. Students in the loan-offer group who borrowed earned significantly higher GPAs over the academic year, with a cumulative increase of more than half a point on a four-point scale—roughly the difference between a “B” and an “A-” grade.

Borrowers were more likely to transfer to a four-year institution a year later. Borrowers were 12 percentage points less likely to re-enroll in the community college for the 2016-17 academic year, a decrease of 23 percent, but they were 11 percentage points more likely to transfer to a bachelor’s degree program within a four-year public institution, a remarkable 178 percent increase relative to the control group.

Borrowers likely to earn more annually after graduation. Drawing on existing research, the researchers estimate that student borrowers will earn $370 more per year, on average, based on taking out a $4,000 student loan.

“More than five million students attend U.S. colleges that do not offer loans in financial-aid award letters,” say Marx and Turner. “However well intended, efforts to discourage student borrowing may be hinder­ing students’ progress rather than protecting their future.”

To receive an embargoed copy of “The Benefits of Borrowing: Evidence on Student Loan Debt and Community College Attainment” or to speak with the authors, please contact Jackie Kerstetter at The article will be available Tuesday, November 14 on and will appear in the Winter 2019 issue of Education Next, available in print on November 16, 2018.

About the Authors: Benjamin M. Marx is an assistant professor of economics at the University of Illinois at Urbana-Champaign. Lesley J. Turner is an assistant professor of economics at the University of Maryland.

About Education Next: Education Next is a scholarly journal committed to careful examination of evidence relating to school reform, published by the Education Next Institute and the Harvard Program on Education Policy and Governance at the Harvard Kennedy School. For more information, please visit

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