Keeping up With the Joneses: Institutional Changes Following the Adoption of a Merit Aid Policy

The increasing use by private colleges and universities of financial aid based on “merit”, as opposed to based solely on financial need has caused many to raise concerns that this type of aid will go mainly to higher income students crowding out aid to lower income students. However, some analysts suggest that by attracting more “almost full-paying” students through the use of merit aid, institutions will have more financial resources that they can use to increase their financial aid to low-income students and thus their enrollment. Results using data from the College Board’s Annual Survey of Colleges and other secondary data sources suggest that the increased use of merit aid is associated with a decrease in enrollment of low-income and minority students, particularly at more selective institutions. Additionally, this paper examines how institutions may be diverting financial resources to fund merit aid awards, such as through the increased use of part-time faculty, increases in tuition or fees, or smaller increases in faculty salaries. For middle and bottom tier colleges a merit aid policy is accompanied by an increase in tuition. Top tier colleges experience decreases in faculty salaries after the introduction of a merit aid policy, and bottom tier colleges see increases in salaries

Dollars for Degrees: Financial Aid and its Impact on Post-Secondary Degree Completion in Texas

Researchers have begun to investigate more deeply the specific effects of rising college costs, increasing debt, and the impact of financial aid on degree completion. Specifically, this paper describes the various sources and types of financial aid available to postsecondary students in Texas, how financial aid is packaged at different types of institutions, and the effects of financial aid types and packages on post-secondary persistence and completion. An appendix contains additional detail on federal, state, institutional and private aid sources as well as a list of the advisors, interviewees, and focus group members we spoke with during our research. While this paper focuses on financial aid in Texas given GTF's state-based purview, we believe many of the lessons are applicable across the country

How Financial Aid Affects Persistence

The Pell Grant program is the largest means-tested financial assistance available to postsecondary students across the United States, yet researchers have only limited evidence on the causal effects of these grants. This paper examines the effect of Pell grants on student persistence after the first year. The paper uses unique, student-level data from all public colleges in Ohio. The data include detailed financial data which allow me to identify small discontinuities in the Pell grant formula. I exploit these discontinuities to identify the causal effects of the voucher. The results based on discontinuity approaches suggest that Pell grants reduce college drop-out behavior. The results in this paper support other evidence that find a relationship between need-based aid and college completion (e.g. Dynarski 2002, Turner and Bound 2002).

Financial aid and college choice

Education - Economic aspects

Acting Autonomously or Mimicking the State and Peers? A Panel Tobit Analysis of Financial Dependence and Aid Allocation by Swiss NGOs

NGO aid is still widely believed to be superior to official aid (ODA). However, the incentives of NGOs to excel and target aid to the poor and deserving are increasingly disputed. We contribute to the emerging literature on the allocation of NGO aid by performing panel Tobit estimations for Swiss NGOs. The analysis offers new insights in two major regards: First, we cover the allocation of both self-financed and officially co-financed aid for a large panel of NGOs and recipient countries. Second, by classifying each NGO according to its financing structure, we address the unresolved question of whether financial dependence on the government impairs the targeting of NGO aid. It turns out that NGOs mimic the state as well as NGO peers. Officially refinanced NGOs are more inclined to imitate the allocation of ODA. However, the degree of financial dependence does not affect the poverty orientation of NGO aid and the incentives of NGOs to engage in easier environments. The allocation of self-financed aid differs in several respects from the allocation of officially co-financed aid, including the role of financial dependence for imitating the state and herding among NGOs.NGO aid; aid allocation; official co-financing; financial dependence

Need-Based Financial Aid: A Tool for Supporting Ohio's Education and Workforce Goals

In 2009, Ohio cut in half the General Revenue Fund appropriation for the Ohio College Opportunity Grant (OCOG) need-based financial aid program and ended the program for students in public 2-year institutions. This study examines the impact on Ohio students of these cuts and recommends strategies to strengthen need-based aid programs and policy in Ohio. To show the impact of the OCOG cuts, the research compares a variety of indicators before and after the cuts, including Ohio's need-based aid per student relative to neighboring states, state aid as a percentage of federal Pell grant awards, and average student debt. Each of these indicators worsened significantly in the wake of the cuts. Recommendations include: (1) Increasing total funding for need-based aid; (2) Restoring aid for students at 2-year public institutions; (3) Implementing approaches to financial aid that support low and moderate-income students' enrollment in college and attainment of a certificate or degree

Local Financial Development and the Aid-Growth Relationship

With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis.Foreign aid,economic growth,poverty,financial development

The Contract for College

Rising college costs, combined with major policy changes in financial aid, have made college less affordable for today's generation of young people. The Contract for College would unify the existing three strands of federal financial aid--grants, loans and work-study--into a coherent, guaranteed financial aid package for students

Does Federal Financial Aid Drive Up College Prices?

The "Bennett Hypothesis" is the theory that : The availability of federal loans -- particularly subsidized loans offering a below-market interest rate and payment of interest as long as the student is enrolled in school -- provides "cover" for colleges to raise their prices, because students can offset a price increase, or at least a portion of that increase, with federal loans.This report examines research that attempts to prove or disprove the Bennett Hypothesis, with a focus primarily on the impact of federal grants and loans on college and university tuition price increases. Section two presents a brief overview of federal student financial aid programs, recent trends in tuition prices, and the economic theory behind financial aid and tuition prices. Section three reviews some of the research that has analyzed the veracity of the Bennett Hypothesis over the years.Section three also describes studies with similar methodologies but contrary findings. The research suffers from limitations in the data used, particularly in the measures of federal aid used as predictors. There are also limitations in the data analysis methodologies employed, including the researchers' inability to fully control for all of the complex factors that go into the decisions that institutions make when determining tuition prices. More details about these issues are presented in this section. The final section summarizes what this body of research tells us about the relationship between federal student aid and tuition prices

Strengthening State Financial Aid Policies for Low-Income Working Adults

Explains the need to expand state financial aid programs to help the working poor enroll in college. Recommends funding new aid for working adults as well as strengthening existing aid to meet their needs, and describes recent state initiatives