Effects of Federal Loans on First-Year College Student Retention, Transfer, and Dropout

This study utilizes marginal mean weighting through stratification (MMW-S) to analyze data from the Beginning Postsecondary Students 2012-2014 (BPS:12/14) survey. Specifically, this study estimates the effects of federal loan levels on first-year college students' decisions to persist by staying at their first institution or by transferring to another institution, or to drop out of the higher education system. Results indicate non-linear and heterogeneous effects of federal student loans. Compared with zero loans, having a low level of federal student loans is positively related to transferring to other institutions. Compared with zero loans, having a moderate level of loans is negatively associated with system dropout. Through interaction effect tests, we find some variation in these effects between students by race/ethnicity, with federal loans uniquely and adversely affecting Black student persistence.