The Effect of Loans on Students' Degree Attainment: Differences by Student and Institutional Characteristics

Abstract

In this article, Dongbin Kim investigates the relationship between undergraduate student loan debt and degree attainment. Using data from the Beginning Postsecondary Student (BPS) surveys in 1995–1996 and 2000–2001, she examines whether the relationship between debt and degree attainment is different for students with different parental income levels or racial/ethnic backgrounds, and for students attending different types of higher education institutions. Controlling for a range of individual and institutional characteristics, Kim uses hierarchical generalized linear modeling to find that higher student loan debt in the first year of college is associated with lower probabilities of degree completion among low-income and Black students. Her findings suggest that students' increased reliance on loans for financial aid may widen the income and racial/ethnic gaps in degree completion, despite the fact that a primary goal of financial aid is to narrow those gaps.