High-Dollar Student Debt May Compromise Educational Outcomes

Author(s): 
Lewis, Melinda
Project(s): 
College Debt
Publication type: 
Brief

Student debt is understood as an investment in expanding access to higher education, but there is some evidence that debt may work at cross-purposes by impairing or, at least, failing to support, educational outcomes.

For some students, the prospect of high-dollar student debt may discourage enrollment.

Low-income students who are loan-averse may actually decide not to enroll in college at all in order to avoid debt.

Debt over a certain amount (about $10,000) may depress graduation rates and harm post-college financial security, especially for those in the bottom 75% of the income distribution.

As the student debt threshold level increases so too does the dropout level, particularly for poor and minority students.

Higher student loan debt in the first year of college may be associated with lower probabilities of graduating from college among low-income and black students.

Studies suggest that a $1,000 increase in student debt is associated with a 3% increase in students dropping out of college.

Student debt is an ineffective tool with which to tackle the U.S.’ greatest educational challenge: helping students prepare to succeed academically in college. Unlike college savings programs, the prospect of costly student debt does not motivate students to prepare for college.

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New Book Released

Today’s student loan system is in place because of a political compromise, and growing discontent with student debt may signal that this arrangement has run its course. While there are resources and organizations in place to help those struggling with debt, the time has come to consider a new direction for financial aid, William Elliott III and Melinda Lewis argue in “Student Debt: A Reference Handbook.”

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