Attainment Effects of Student Loans and Pell Grants

摘要

Our results show the attainment benefits of both grants and student loans. In contrast to prior studies, we estimate the effect of increasing Pell Grant aid while holding constant borrowing. We find that the partial effect of each dollar of grant aid increases short-run attainment by two to four times more than a dollar of loan aid, suggesting the potential to achieve substantial attainmentgains by increasing grant aid to students whose borrowing is limited, including the nearly one million students attending colleges that have opted out of the federal loan program.At the same time, student loans can also lead to considerable increases in attainment. Because most loans will be repaid, a back-of-the-envelope calculation shows that a net public expenditure of $ 1,000 on student loans leads to approximately eight additional credits completed over an academic year (Marx and Turner forthcoming). The value of student loans as a cost-effective tool should be considered in light of efforts to limit borrowing, which have been especially pronounced at community colleges, where roughly five million students receive financial aid "offers" that include no loan aid.