Denying loan access: The student-level consequences when community colleges opt out of the Stafford loan program

Mark Wiederspan

Economics of Education Review, 2016, vol. 51, issue C, 79-96

Abstract: The degree to which students are able to make adequate repayments on their student loans and avoid default is of special concern for colleges. If too many former students go into default, the college will face sanctions by the federal government and lose eligibility to provide currently enrolled students federal financial aid, such as the Pell grant. To avoid these sanctions, some colleges have chosen not to participate in federal loan programs by excluding loans from students' financial aid packages. In this article, I investigate the student-level impacts associated with the decision of community colleges to opt out of the Stafford loan program. Utilizing administrative records from over 50 community colleges located in a single state, I estimate the within-college differences in outcomes for Pell-eligible students before and after an institution opts out of the federal loan program. I find that Pell-eligible students enrolling when the community college offered federal loans were 7.6 percentage points more likely to borrow than Pell-eligible students who enrolled when the institutions opted out. Overall borrowing also increased by $368 a year. I also find that students borrowing a loan attempted 19 additional credits in their first year of enrollment and were more likely to attempt and complete math and science courses than non-borrowers.

Keywords: Financial aid; Student loans (search for similar items in EconPapers)
JEL-codes: H52 I22 I24 J24 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:51:y:2016:i:c:p:79-96

DOI: 10.1016/j.econedurev.2015.06.007

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