New Experimental Evidence on the Effectiveness of Need-Based Financial Aid

My first experience doing higher education research began in the spring 2008, when I (then a graduate student in economics) responded to an e-mail from an education professor at the University of Wisconsin who was looking for students to help her with an interesting new study. Sara Goldrick-Rab was co-leading an evaluation of the Wisconsin Scholars Grant (WSG)—a rare case of need-based financial aid being given to students from low-income families via random assignment. Over the past decade, the Wisconsin Hope Lab team published articles on the effectiveness of the WSG in improving on-time graduation rates among university students and on changing students’ work patterns.

A decade later, we were able to conduct a follow-up study to examine the outcomes of treatment and control group students who started college between 2008 and 2011. This sort of long-term analysis of financial aid programs has rarely been conducted—and the two best existing evaluations (of the Cal Grant and the West Virginia PROMISE program) are on programs with substantial merit-based components. Eligibility for the WSG was solely based on financial need (conditional on being a first-time, full-time student), providing the first long-term experimental evaluation of a need-based program.

Along with longtime collaborators from our days in Wisconsin (Drew Anderson of the RAND Corporation, Katharine Broton of the University of Iowa, and Sara Goldrick-Rab of Temple University), I am pleased to announce the release of our new working paper on the long-term effects of the WSG to kick off the opening of the new Hope Center for College, Community and Justice at Temple University. We found some evidence that students who began at four-year colleges who were assigned to receive the WSG had improved academic outcomes. The positive impacts on degree completion for the initial cohort of students in 2008 did fade out over a period of up to nine years, but the grant still helped students complete their degrees more quickly than the comparison group. Additionally, there was a positive impact on six-year graduation rates in later cohorts, with treatment students in the 2011 cohort being 5.4 percentage points more likely to graduate than the control group.

The grant generated clear increases in the percentage of students who both declared and completed STEM majors, even though the grant made no mentions whatsoever of STEM and had no major requirements. A second new paper by Katharine Broton and David Monaghan of Shippensburg University found that university students assigned to treatment were eight percentage points more likely to declare a STEM major, while our paper estimated a 3.6 percentage point increase in the likelihood of graduating with a STEM major. This strongly suggests that additional need-based financial aid can free students to pursue a wider range of majors, including ones that may require more expensive textbooks and additional hours spent in laboratory sessions.

However, the WSG did not generate across-the-board positive impacts. Impacts on persistence, degree completion, and transfer for students who began at two-year colleges were generally null, which could be due to the smaller size of the grant ($1,800 per year at two-year colleges versus $3,500 at four-year colleges) or the rather unusual population of first-time, full-time students attending mainly transfer-focused two-year colleges. We also found no effects of the grant on graduate school enrollment among students who started at four-year colleges, although this trend is worth re-examining in the future as people may choose to enroll after several years of work experience.

It has been an absolute delight to reunite with my longstanding group of colleagues to conduct this long-term evaluation of the WSG. We welcome any comments on our working paper and look forward to continuing our work in this area through the Hope Center.

Author: Robert

I am an assistant professor of higher education at Seton Hall University. All opinions are my own.

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