Financing College Through Student Loans: An Incentive for Academic Performance?
- 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.
Copyright: © 2023 Gunnar B˚ardsen, Snorre Lindset and Peter Resch. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
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- Academic Performance
- Student Debt
- College Students
- Probit Regression