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Students who take out loans have worse grades, new Penn study finds

Start sending out your grant applications now – your future grades may depend on it.

A new study by University of Pennsylvania Wharton School Prof. Peter Cappelli and 2016 graduate Shinjae Won reviewed the academic performance of 1993 university graduates, The Daily Pennsylvanian reports:

[E]ven after controlling for other factors like family income, race or academic background before entering college, students who received only grants performed significantly better in college — with GPAs between 0.8 and 0.15 points higher than their peers.

“What we find is basically the opposite of what the literature on people getting financial aid suggests: even though they’re poorer … people who got grants tended to perform better than people who didn’t [get financial aid], and people who got loans tended to do worse,” Cappelli said.

Cappelli and Won speculate that the psychological concept of “reciprocity” might motivate students who receive grants (a favor) to work harder in school (“reciprocate”). He writes in the conclusion:

The general notion that making students pay for their education will also make them take it more seriously and that this, in turn, will make them perform better should be questioned.

The Daily notes that previous research by the centrist Democratic think tank Third Way and Ohio State University found that “modest” loan debt – around $10,000 – “actually improved graduation rates.”

Read the story.

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