Going, going, gone: the effects of aid policies on graduation at three large public institutions

Abstract

This paper exploits uniquely detailed data and cross-institution variation in aid for three large public universities to identify the effects of aid on the probability of college graduation. The results indicate that need-based and merit-based aid both increase graduation rates at large public institutions, but primarily through the types of students that ‘select’ these institutions. Merit-based aid facilitates an institution attracting students who have higher observed academic ability that raises the probability of graduation. Need-based aid enables an institution to attract students with non-academic attributes such as social and cultural networks that, while often unobserved, improve graduation success. Broadly, our results suggest that recent aid policy that has moved away from need-based aid for low-income students (reducing their ability to find the best institutional match) and toward merit-based aid (that alters the distribution of high ability students across colleges) could foster stagnant graduation rates even with rising enrollment rates that have been observed over the last three decades. Copyright Springer Science+Business Media, LLP 2006Higher education policy, Economics of education, Financial aid, College enrollment, College completion,

Student Aid and Its Role in Encouraging Persistence

“…In addition to efforts to test the models of Vincent Tinto (Braxton et al, 1997;Cabrera et al, 1990;Halpin, 1990;Hurtado and Carter, 1997;Milem and Berger, 1997;Nora et al, 1990;Tierney, 1992) and John Bean (Andreu, 2002;Farabaugh-Dorkins, 1991;Himelhoch et al, 1997;Stahl and Pavel, 1992), there is a growing body of literature that examines the effects of student financial aid on student persistence (e.g., Cabrera et al, 1992;DesJardins et al, 2002a;Dowd and Coury, 2006;DuBrock and Fenske, 2000;Paulsen and St. John, 2002;St. John et al, 1996;Singell and Stater, 2006). These studies represent a diverse set of foci.…”

“…Studies of community colleges incorporate transfer, return, and reenrollment into definitions of persistence (e.g., Battaglini, 2004;Dowd and Coury, 2006). Other studies examine persistence as ultimately defined by graduation (Alon, 2005;Stinebrickner and Stinebrickner, 2003;Singell and Stater, 2006). Since degree completion is the goal of both students and policymakers, the effects of financial aid on graduation would have the most utility for this chapter.…”

“…This makes it possible to examine how various forms of financial aid interact with student background characteristics and types of institutions to influence student persistence. The weaknesses of these databases include the following limitations: Braunstein et al, 2000Li and Killian, 1999Bresciani and Carson, 2002Lichtenstein, 2000Cabrera et al, 1992Singell, 2004DesJardins, 2001Singell and Stater, 2006DesJardins et al, 2002Somers, 1995Herzog, 2005Lam, 1999Stinebrickner and Stinebrickner, 2003 (1) they may lack sufficient sample sizes to examine the effects of specific state financial aid programs, (2) they do not allow for the examination of the effects of institutional aid programs at a specific college or university, and (3) large national databases typically lack sufficient measures of the effects of college experience variables (such as academic and social integration) that have been found to be strong predictors of persistence. The first National Postsecondary Student Aid Study (NPSAS:87) includes GPA, hours of required instruction per week and remedial course-taking (NPSAS, 1987).…”

“…Using institutional data, investigators have been able to conduct longitudinal studies of the effects of institutional financial aid programs on student persistence (Cabrera et al, 1992;DesJardins et al, 2002a;Herzog, 2005;Singell and Stater, 2006). Unlike federal or state databases, institutional databases sometimes include measures of constructs typically used in student retention research, such as academic and social integration (Lichtenstein, 2002;Perna, 1998;Cabrera et al, 1992).…”

The Effect of Student Financial Constraints on University Non-Completion Rates

“…It is therefore not surprising that several studies demonstrate that financial assistance is positively correlated to university completion (Alon, 2005;Adnett, 2006;Bean, 1983;Braunstein, McGrath & Pescatrice, 2000;Cabrera, Nora & Castañeda, 1992;Dowd & Coury, 2006;Henry, Rubenstein & Bugler, 2004;Jensen, 1981, Kalsner, 1991Perna, 1998;St. John, Hu & Weber, 2001;Singell, 2004;Singell & Stater, 2006). In fact Gross, Berry & Reynolds (2015) declare that financial aid and completion rates are critical elements in the strategic management of academic success in higher education.…”