While student loan debt has been a major issue in both Clinton and Trump’s presidential campaigns, it has also spurred debate among economists and academic professionals.
Experts question if reducing student loans would also decrease the incentive to work hard, but supporters of free education just got an added boost to their argument with a newly released study.
In September, the National Bureau of Economic Research issued a study that showed student loans actually cause lower grades. Researchers behind the paper found that students with loans had weaker grades than students with grants.
This development highlights the current issues facing the educational system and student loans.
Student loans and grade point averages
The new study linked student loan debt with lower academic performance. Students who had their tuition paid with grants (which do not have to repaid) had better grades than their peers who paid for school with loans. Without the burden of debt, individuals worked harder.
While the study’s results were just released, the research focused on two groups of students who graduated from four-year colleges back in 1993.
The first group of student received grants to pay for their education and were debt-free. The second group received other forms of financial aid, such as student loans.
Even when the researchers controlled for other factors, such as family background and academic ability upon entering school, the students who received grants outperformed the people who received loans.
Students who had grants rather than loans scored 0.08 to 0.15 higher than their peers on a 4.0-grade point scale. That is a significant difference in academic performance.
The study’s researchers posed an interesting theory. They suggest that having debt guilts those with grants into working harder.
“The grants create pressure to reciprocate by taking academic performance more seriously,” write study authors Peter Cappelli and Shinjae Won.
According to the authors, student loan debt discourages students. It causes them to be cynical about the cost of school and they stop working as hard. The loan balance hanging over their heads makes students more critical of tuition costs.
Implications for student loan policies
The researchers say this data disproves the idea that reducing the cost of school will cause individuals to slack off.
“The notion that making students more responsible for the costs of education will make them take it more seriously is not supported by these results,” say Cappelli and Won.
For supporters of Bernie Sanders and his efforts towards free education, this is ammunition for their argument. While naysayers say that cost-free tuition would encourage laziness and poor academic performances, this study shows otherwise.
Potential flaws in the new study
While the study is conclusive in its findings, there are some flaws with the research.
One problem? The data is quite old. The study participants graduated from school over 20 years ago. In 1993, the average graduate had just over $9,000 in student loan debt. The average graduate in 2016 has over $37,000.
A second potential issue in Cappelli and Won’s research is the fact that grants only applied to one group of students.
Some researchers claim the effect of grants causing students to work harder only applies if other students do not have the same option. If college was free for everyone, they claim that grades would go down and the effect would no longer work.
In direct contradiction of this study’s results, other research has identified a link between student loan debt and higher grades.
Third Way, a democratic think tank, released a paper last year that demonstrated that students with some student loans are more likely to graduate and perform better than students who did not have any. The data showed that students with up to $10,000 in loans performed better than their peers.
Further, other research points out that eliminating student loans puts the burden on taxpayers. With the government paying the bill, colleges and universities may raise their tuitions a great deal, making it even more expensive.
What this means for you
While the research on this issue is ongoing, it’s important to note that taking out loans can make you feel discouraged and helpless. Understanding that this factor is at work can help you battle its effect.
You can decrease the psychological drain of student loans by limiting how much you borrow in the first place. Evaluating the total cost of attendance, applying for scholarships, and working a side gig while in school can help decrease how much debt you need to take out.
Limiting your loans can help give you the freedom you need to succeed personally and academically.
If your debt is weighing you down, research your options. From income-driven repayment plans to refinancing your loans, there are ways to make your debt more manageable so you can focus on your own needs.
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Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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