The Benefits Of Taking Out Loans For College

Student debt in the U.S. now stands at about $1.5 trillion. It’s a number we often call a crisis, advising students to avoid borrowing if they possibly can.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.”

But what if those loans are actually a good thing?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?

On the first question: Did they borrow more? The answer was yes; students who were offered a loan amount in their letters were more likely to borrow.

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.