The Impact of Student Financial Aid: A Review of Recent Research

At the start of the past decade, serious doubts were raised about the effectiveness of student financial aid, which influenced cuts in federal support for student aid in the 1980s. One of the objectives of this review is to determine whether there are reasons for these doubts. Other objectives are to determine whether changes in federal aid policy during the 1980s influenced equal opportunity and to identify unanswered research questions. The review indicates that student aid is an effective mechanism for promoting equal educational opportunity. However, the erosion in federal grant dollars during the past fifteen years may have influenced an erosion in minority access. The intent of federal student financial aid programs authorized under Title IV of the Higher Education Act (HEA) is to promote equal educational opportunity. Questions about whether student aid promoted this goal were raised by researchers in the early 1980s (e.g. Hansen, 1985). While it may be too late to recapture the cuts in federal grant programs made in the 1980s, given the current emphasis on reducing the federal budget deficit, it is, nevertheless, an opportune time to reconsider the effectiveness of student aid. This article reviews prior research on the impact of student financial aid. First, the framework used for the review is discussed briefly. Second, we focus on our knowledge of the impact of student aid on equal opportunity. Research is considered on each of the components of equal opportunity: access (attendance), choice of school, persistence, choice of major, and earnings. Finally, the findings from recent research are summarized and questions that merit further consideration by policy and institutional researchers are identified

The Impact of Aid Packages on Educational Choices: High Tuition-Hi Loan and Educational Opportunity

During the past three decades there have been substantial changes in federal and state student aid policies, but what effect did these policy changes have on educational opportunity? This paper summarizes prior studies by the author with a focus on untangling how changes in policy have influenced changes in opportunity. It also recommends new strategies for lowering student loan debt, increasing federal and state cooperation in providing adequate need based grant aid, and developing policies that target debt forgiveness for mid-skilled workers and middle-class professionals

The Effects of Changes in Student Aid Policy on Persistence: A Case Study of a Private University

In recent years, a new approach for assessing the effects of student aid has emerged that can be used to evaluate the effects of aid strategies in colleges and universities. This article illustrates how these new models can be used to assess the effects of changes in government and institutional aid policy on persistence. This case study explores the implications of an increased reliance on loans in institutional aid packaging

The Influence of Debt on Choice of Major

There has been speculation that high debt burden influences students to choose majors with high expected earnings. Ibis article develops and tests a model for examining the factors that influence college students to choose majors with higher expected earnings. Final major choices made in 1985 by college students in the high school class of 1980 were examined. The findings include: 1) major choice is influenced by social background, high school achievement, high school major choice, and college experiences; and 2) debt burden was not significantly associated with major choice

Workable Models for Institutional Research on The Impact of Student Financial Aid

In spite of recent progress in national studies of the impact of student financial aid, there are still many ambiguities about whether student financial aid has a measurable effect at the institutional level. This paper proposes models and suggests methodologies that institutions can use to conduct their own research on the impact of student financial aid, using existing data sources. Student financial aid administrators can, and should, play an integral role in such research because their student aid expertise can be valuable in formulating research questions and interpreting research findings. Well-designed and executed institutional research on the effect of student aid cannot only help resolve ambiguities about the impact of student aid, but can also provide useful information for institutional financial planning

The Influence of Student Aid on Persistence

The increased emphasis on loans during the 1980s as a major source of student financial aid has caused some people in the higher education community to speculate that this shift could have detrimental effects on long-term persistence. This article examines the evolving influence of student financial aid on year-to-year persistence for three student cohorts, the high school classes of 1972, 1980, and 1982. A comparative analysis of the National Longitudinal Study and High School and Beyond Survey is presented. The findings include: (1) loans as the only form of aid were negatively associated with first-to-second-year persistence in the 1970s, but not the 1980s; and (2) all types of aid packages were positively associated with year-to-year persistence in the 1970s and 1980s

Tools of State: Using Research to Inform Policy Decisions in Higher Education

For many decades, states and the federal government have used both qualitative and quantitative studies to inform policy decisions, yet there have been longstanding concerns among qualitative researchers that their work is treated as second class. This paper examines an alternative construction of the problem. Policymakers in states and federal agencies treat policy research as tools of state—instruments to be used by policy makers—a practice in conflict with the moral stance of many qualitative researchers. Recognizing this problem, I provide guidance for constructing quantitative and qualitative research to inform decisions on policies on equity in preparation for, access to, and academic success in higher education without undermining the researchers’ quest for truth

Interpreting Price Response in Enrollment Decisions: A Comparative Institutional Study

While national research has shown that student financial aid has a positive, direct effect on the first-time enrollment of students, there has been little published research that examines the impact of the aid strategy on whether students enroll at a single institution. This article analyzes the influence of aid on the enrollment decisions of all accepted applicants at four institutions and interprets this research. In most instances, the amount of aid offered was negatively associated with first-time enrollment, indicating that aid offers were insufficient to promote enrollment for the otherwise-average applicant. This suggests that institutions need to study carefully the use of their own funds as a means of increasing yield

Assessing the Impact of Financial Aid Offers on Enrollment Decisions

Historically, colleges and universities have lacked models for systematically assessing the impact of their financial aid strategies on the enrollment decisions of admitted applicants. This study tests a model for assessing the impact of aid offers on enrollment decisions. The analysis demonstrates that: 1) financial aid strategies have a substantial influence on enrollment; and 2) the systematic analysis of student enrollment decisions can help institutional administrators refine their financing decisions

Return on the Federal Investment in Student Financial Aid: An Assessment for the High School Class of 1972

It can be argued that the public investment in student financial aid should be evaluated based on the tax revenue returns that result from this investment. While this is not the only basis on which student aid can be justified in the budget process, this approach does have merit, especially given the large federal deficit. This article develops a model for estimating the tax revenue returns from gains in educational attainment that are attributable to student financial aid. This study examines the impact of student aid on access and persistence. It is estimated that the net present value of the tax returns on each dollar of federal expenditures on student aid for students in the high school class of 1980 was $4.30, using reasonable economic assumptions. The authors conclude that student financial aid generates a positive return to the federal budget, a research finding that merits consideration in the budget process