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Year:: 2019
Contributor:: Andrew C. Barr (author); Kelli A. Bird (author); Benjamin L. Castleman (author)
Genre:: grey literature
Subject:: student loans; borrowing; financial aid; college; experiment; higher education; Post-secondary education; Access and admissions; Finance; Inequality; Multiple outcomes of education; Program and policy effects

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Abstract:: Student loan borrowing for higher education has emerged as a top policy concern. Policy makers at the institutional, state, and federal levels have pursued a variety of strategies to inform students about loan origination processes and how much a student has cumulatively borrowed, and to provide students with greater access to loan counseling. We conducted an experiment to evaluate the impact of an outreach campaign that prompted loan applicants at a large community college to make informed and active borrowing decisions and that offered them access to remote, one-onone assistance from a loan counselor. The intervention led students to reduce their unsubsidized loan borrowing by 7 percent, resulted in worse academic performance, and increased the likelihood of loan default during the three years after the intervention occurred. Our results suggest policy makers and higher education leaders should carefully examine the potential unintended consequences of efforts to reduce student borrowing, particularly in light of growing evidence regarding the counter-intuitive positive relationship between reduced borrowing levels and worse student academic and financial outcomes.

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Use and Reproduction: In Copyright

Citation

Andrew C. Barr, Kelli A. Bird, and Benjamin L. Castleman, "The Effect of Reduced Student Loan Borrowing on Academic Performance and Default: Evidence from a Loan Counseling Experiment" (2019). EdWorkingPapers.com Archive. Brown Digital Repository. Brown University Library. https://repository.library.brown.edu/studio/item/bdr:956617/

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EdWorkingPapers.com Archive

The Annenberg Institute at Brown University has developed this national working paper series to provide public access to high-quality papers from multiple disciplines on a wide variety of topics related to education. EdWorkingPapers focuses particularly on research with strong implications …
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The Effect of Reduced Student Loan Borrowing on Academic Performance and Default: Evidence from a Loan Counseling Experiment