One of the hardest questions college students nationwide face isn’t on a test. It’s whether to take out a loan and have more time to focus on classes, avoid debt by working, or juggle a combination of these two options.

A new study co-led by a University of Maryland researcher shows how accepting a loan offer might be a good thing.

Assistant professors of economics Lesley J. Turner of UMD and Benjamin M. Marx of the University of Illinois noticed that many community colleges don’t tell students in financial aid award letters that they are eligible for federal student loans.

While students are notified of their eligibility through additional channels, the information in award letters may be especially influential to students making borrowing decisions. Colleges have discretion over whether to include loans in these letters, but may avoid “packaging” loans to protect students from taking on debt, Turner said. But is this strategy beneficial?

Turner and Marx randomly divided students at a large community college into groups of about 10,000 that had received loan offers ($3,500 for first-year students or $4,500 for second-year students) or $0. They found that students who received a loan offer were more likely to borrow, and the students induced to take out a loan due to their award letters earned more credits and higher GPAs and were more likely to transfer to a four-year public institution.

“Would this make it worth it for them to borrow? Our calculations suggest it is,” Turner said.

She warned, however, that the study followed the subjects for only two years, and that whether students are ultimately better off borrowing hinges on whether they are able to use their loan aid to complete their degrees. She and Marx will continue to follow these students, and they’re working to conduct additional experiments.

While this research focused on community college students, it has implications for Maryland students as well, Turner said. Terps should take advantage of the financial advisors and resources available to them on campus.

“I think one important takeaway is that (the listed loan amount) is not necessarily a recommendation,” she said. “Take a step back and think through your own circumstances.”

Check out the by-the-numbers borrowing breakdown:

Student loan infographic