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EducationDive
Loans are worth the cost for some community college students, study finds
James Paterson
Feb. 11, 2019
Dive Brief:
Community colleges often discourage their students from taking out
loans to cover their education, but new research suggests students who
receive some forms of loan aid perform better and have higher earnings
when they graduate, according to a new report in EducationNext.
Because student borrowing has been called a crisis, many colleges are
trying to reduce students' debt by offering less loan aid. To gauge the
impact on students of colleges' efforts to reduce borrowing, a pair of
researchers looked at outcomes for two groups of 10,000 students at a
single large community college who received zero or nonzero loan awards.
They found that students who accepted nonzero loan offers ($3,500 or
$4,500) earned on average nearly four more credits, obtained a GPA
nearly a half grade-point higher, and were more likely to transfer to a
four-year college. They also earned an average of $370 more per year
upon graduation.
Dive Insight:
A report pointing to the positive effects of student borrowing is
uncommon. Some students and colleges have shied away from loans because
of negative media attention that some experts contend has misstated or
exaggerated student debt.
"However well intended, efforts to discourage student borrowing may be
hindering students' progress rather than protecting their future," the
report's authors write, noting "the resources provided by student loans
could mean the difference between working longer hours and having
additional time to spend in class or on coursework."
An October article from the Wharton School at the University of
Pennsylvania called student debt "one of the creeping threats of our
time," noting its levels have more than tripled since 2004, leaving
graduates "holding promissory notes worth an average of $37,000." It
suggested debt could limit student borrowers' ability to buy a house,
get married, have children and save for retirement.
Yet, the report notes, less than 5% of graduates have the burdensome
$100,000 in debt that has been described in the media. It points out
such high levels are generally accumulated by students who seek
advanced degrees and that about 40% of students with debt owed $10,000
or less. Debt can be especially problematic for students who don't
finish their degree and therefore lack the credentials deemed valuable
enough to have made the borrowing worthwhile.
Colleges are also concerned poor loan repayment rates would cause them
to lose their eligibility to offer federal student loans and grants.
Various options for handling student debt are coming up in discussions
over a possible reauthorization of the Higher Education Act.
Retiring Sen. Lamar Alexander (R-Tenn.), who chairs the Senate
education committee and has for years sought to reform student
borrowing, wants to change rules sanctioning colleges whose students
excessively default on loans, noting they are rarely enforced.
Congressional Democrats, meanwhile, are focusing on strengthening
gainful employment regulations. If reauthorization does happen this
session, it's not likely to take the form of sweeping legislation as
both sides work to merge their disparate visions of a rewrite.
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