Research Article Open Access

Financing College Through Student Loans: An Incentive for Academic Performance?

Gunnar B˚ardsen1, Snorre Lindset1 and Peter Resch2
  • 1 Department of Economics, Norwegian University of Science and Technology, Trondheim, Norway
  • 2 Department of Finance, University of Central Florida, Orlando, United States


Student debt in the United States has reached unprecedented levels. Whereas student loans have paved the way to a college degree for millions of young Americans, it is not clear if student debt acts an incentive for academic performance or not. Using the results from a survey conducted with 877 undergraduate business students in a large public university in the United States, we evaluate the association between student debt and academic performance, measured by cumulative GPA. Students with debt have a significantly higher probability of obtaining a GPA below 3.0 than those without debt. For students with a debt balance below $10,000, the probability of achieving a GPA above 3.5 is 7.8 percentage points lower than for students without debt. This difference increases to 13.7 percentage points when the debt balance is between $10,001-20,000. Our findings indicate that the burden of student debt is exacerbated by poorer academic performance.

Journal of Social Sciences
Volume 19 No. 1, 2023, 82-91


Submitted On: 7 February 2023 Published On: 24 August 2023

How to Cite: B˚ardsen, G., Lindset, S. & Resch, P. (2023). Financing College Through Student Loans: An Incentive for Academic Performance?. Journal of Social Sciences, 19(1), 82-91.

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  • Academic Performance
  • GPA
  • Student Debt
  • College Students
  • Probit Regression