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The Benefits Of Taking Out Loans For College

The Benefits Of Taking Out Loans For College

A New Look At The Lasting Consequences Of Student Debt

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One of the ways schools have tried to help students cut down on their debt is to stop packaging federal loans with scholarships and grants in financial aid award letters. It could be the case that, even if a student were eligible for a loan, the award letter would show zero loan dollars. About half of community colleges are now doing this.

«It’s part of the narrative of the student debt crisis,» says Lesley Turner, an assistant professor of economics at the University of Maryland. «Avoid borrowing unless it’s absolutely necessary.»

Turner, along with Benjamin Marx at the University of Illinois, set out to study this: What impact does not packaging loans have on whether students borrow? And for students who were offered loans in their letters and took them did that influence how they did in school?

And what happened to those students who borrowed? «They attempted more courses, they earned more credit, and they had higher grade point averages,» says Turner. The research also found a sizable increase in the likelihood of those students transferring to a four-year public school for a bachelor’s degree.

Many students attending community college are working while in school, so the loans may have freed up time in their schedules to take more classes, to study or to finish their schoolwork. Even though tuition on these campuses is low or for some low-income students, free – there are other expenses.

«The cost of college creates a stress,» says Oded Gurantz, an assistant professor at the University of Missouri who studies higher education. «So if the money frees [students] up so they’re not focusing on where they’re going to get their next meal, I actually think it makes a lot of sense that it could help their academic achievement.»

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