Parent borrowing and college completion

Abstract

Parent PLUS loans are available for parents of traditional students, allowing them to borrow up to the complete cost of attendance if they pass a credit check. Having access to more loan funds might increase a student’s chances of obtaining a bachelor’s degree by allowing them to attend a higher quality school, or to spend fewer hours working and perform better academically. Among students who intend to earn a 4-year degree and are eligible for PLUS loans, are those whose parents take out Parent PLUS loans, more likely to earn BA degrees than those who don’t? Using the 2004/09 Beginning Postsecondary Students Longitudinal Study (BPS: 04/09) and controlling for student demographic characteristics, parent’s financial resources, support level, family demographic characteristics, the child’s academic ability, institution sector, and the child’s transfer status we examine this possibility. The initial regression showed that having a Parent PLUS loan was not significantly associated with the probability of earning bachelor’s degree within 6 years of first enrollment. However, after weighting the sample by inverse propensity scores we found that having a PLUS loan significantly increased the odds of earning a bachelor’s degree by 43%.