The Effect of Reduced Student Loan Borrowing on Academic Performance and Default: Evidence from a Loan Counseling Experiment Jun 01, 2019 By Andrew BarrKelli BirdBenjamin Castleman The Effect of Reduced Student Loan Borrowing on Academic Performance and Default: Evidence from a Loan Counseling Experiment Student loan borrowing for higher education has emerged as a top policy concern. Policy makers at the institutional, state, and federal levels have pursued a variety of strategies to inform students about loan origination processes and how much a student has cumulatively borrowed, and to provide students with greater access to loan counseling. We conducted an experiment to evaluate the impact of an outreach campaign that prompted loan applicants at a large community college to make informed and active borrowing decisions and that offered them access to remote, one-onone assistance from a loan counselor. The intervention led students to reduce their unsubsidized loan borrowing by 7 percent, resulted in worse academic performance, and increased the likelihood of loan default during the three years after the intervention occurred. Our results suggest policy makers and higher education leaders should carefully examine the potential unintended consequences of efforts to reduce student borrowing, particularly in light of growing evidence regarding the counter-intuitive positive relationship between reduced borrowing levels and worse student academic and financial outcomes. Link to Paper Areas of focus Education UVA partners EdPolicyWorks: Center for Education Policy and Workforce Competitiveness Andrew Barr Kelli Bird Benjamin Castleman Ben Castleman is an associate professor of public policy and education at the University of Virginia. His research focuses on policies and strategies to improve postsecondary educational and workforce outcomes for individuals from lower-income and historically-marginalized communities. His current work focuses on innovations to increase economic mobility among lower-wage adults, including digital- and health-skills training programs; state-funded career and technical education; and competency-based education models for working adults. Read full bio Related Content Benjamin Castleman Unfinished Business? Academic and Labor Market Profile of Adults With Substantial College Credits But No Degree Research Using data from the Virginia Community College System (VCCS), this case provides the first detailed profile on the academic, employment, and earnings trajectories of the SCND population and how these compare with VCCS graduates. The scholars show that the share of SCND students who are academically ready to re-enroll and would benefit from doing so may be substantially lower than policy makers anticipate. Stacking the Deck for Employment Success: Labor Market Returns to Stackable Credentials Research With rapid technological transformations to the labor market along with COVID-19 related economic disruptions, many working adults return to college to obtain additional training or credentials. Using a comparative individual fixed effects strategy and an administrative panel dataset of enrollment and employment in Virginia, we provide the first causal estimates of credential “stacking” among working adults. Peer Mentoring Improves College Success for Lower-Income Students News In a research update brief, Batten Associate Professor Ben Castleman and colleagues show a sustained positive effect of peer mentoring on college persistence for lower-income students. First Gen Students Are Missing from the Nation’s Top Colleges. Here’s How Virtual Advising Could Help News Batten School professor Ben Castleman spoke with USA Today about the benefits of virtual peer-to-peer advising for first-generation college students.