College Financing Choices and Academic Performance

Christiana Stoddard, Carly Urban and Maximilian D. Schmeiser

Journal of Consumer Affairs, 2018, vol. 52, issue 3, 540-561

Abstract: The rapid increase in student loan debt outstanding has garnered significant media and policy attention over the past several years. In contrast, little is known about the short‐term academic consequences of borrowing to finance college attendance. We use detailed student‐level administrative data to examine the relationship between the type and amount of student loans used to pay for college and students' academic performance, choice of major, and retention rates. The results suggest that students who take out loans have lower grade point averages (GPAs) than students who do not. Among students with debt, those with greater student loan balances have lower GPAs, take fewer credits per semester, and have lower retention rates. This is true conditioning on detailed background characteristics as well as in individual fixed effect specifications that control for unobserved time‐constant characteristics of students. These results can help inform policies to mitigate the adverse effects of increasing education debt.

Date: 2018
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