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Study says college students perform better with grants than with loans


Ty Tagami

The Atlanta Journal-Constitution
New research suggests that the grades of college-bound students will be influenced by the kind of financial aid they get.
College performance is “strongly” influenced by effort and the motivation driving that effort can be shaped by the arrangement for covering tuition, the paper found.

The study, “How You Pay Affects How You Do: Financial Aid Type and Student Performance in College,” offers no certain explanation for the relationship. But the authors point to prior research for possible explanations, such as work that indicates people who receive gifts tend to feel an obligation that could translate into more studious behavior.

The bottom line is that grants are good for grades and loans are bad: Students with grants earned grades that were about 0.08 to 0.15 points higher on a 4.0 scale than those without financial aid; students with loans, meanwhile, got grades roughly 0.6 to 0.12 points lower than financial aid recipients with other types of aid.

“The implications for policy here are straight-forward,” concluded the authors, Peter Cappelli at the University of Pennsylvania and Shinjae Won at the University of Illinois. “The tendency in recent years to shift financial aid to loans may well come with a cost in terms of student achievement. 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.”

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