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The impact of merit-based financial aid on college enrollment: A field experiment

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  • Monks, James

Abstract

Merit-based financial aid awards have become increasingly prevalent in the pricing policies of higher education institutions. This study utilizes an experiment to estimate the efficacy of merit-aid awards in achieving the institutional objective of attracting the most academically desirable applicants. I find that merit aid has a statistically significant but inelastic effect on enrollment of extremely high ability students. Additionally, the setting of this paper allows for a test of whether students respond to the framing of price in making enrollment decisions (i.e. price illusion), holding net price constant. There is weak evidence in support of price illusion among this set of students.

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File URL: http://www.sciencedirect.com/science/article/B6VB9-4SH0Y42-2/2/4a9e7ea6e3e402dac42fead63700c297
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Bibliographic Info

Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 28 (2009)
Issue (Month): 1 (February)
Pages: 99-106

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Handle: RePEc:eee:ecoedu:v:28:y:2009:i:1:p:99-106

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Web page: http://www.elsevier.com/locate/econedurev

Related research

Keywords: Educational finance Student financial aid;

References

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  1. Katharine G. Abraham & Melissa A. Clark, 2003. "Financial Aid and Students' College Decisions: Evidence from the District of Columbia's Tuition Assistance Grant Program," Mathematica Policy Research Reports 3675, Mathematica Policy Research.
  2. David M. Linsenmeier & Harvey S. Rosen & Cecilia Elena Rouse, 2006. "Financial Aid Packages and College Enrollment Decisions: An Econometric Case Study," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 126-145, February.
  3. Singell Jr., Larry D., 2002. "Merit, need, and student self selection: is there discretion in the packaging of aid at a large public university?," Economics of Education Review, Elsevier, vol. 21(5), pages 445-454, October.
  4. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
  5. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  6. Singell, Larry D, Jr & Stone, Joe A, 2002. "The Good, the Poor and the Wealthy: Who Responds Most to College Financial Aid?," Bulletin of Economic Research, Wiley Blackwell, vol. 54(4), pages 393-407, October.
  7. Bridget Terry Long, 2004. "Does the Format of a Financial Aid Program Matter? The Effect of State In-Kind Tuition Subsidies," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 767-782, August.
  8. Susan Dynarski, 2004. "The New Merit Aid," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 63-100 National Bureau of Economic Research, Inc.
  9. Christopher Avery & Caroline Minter Hoxby, 2004. "Do and Should Financial Aid Packages Affect Students' College Choices?," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 239-302 National Bureau of Economic Research, Inc.
  10. Thomas J. Kane, 2003. "A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going," NBER Working Papers 9703, National Bureau of Economic Research, Inc.
  11. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
  12. Thomas J. Kane, 2007. "Evaluating the Impact of the D.C. Tuition Assistance Grant Program," Journal of Human Resources, University of Wisconsin Press, vol. 42(3).
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Citations

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Cited by:
  1. Griffith, Amanda L., 2011. "Keeping up with the Joneses: Institutional changes following the adoption of a merit aid policy," Economics of Education Review, Elsevier, vol. 30(5), pages 1022-1033, October.
  2. Nurnberg, Peter & Schapiro, Morton & Zimmerman, David, 2012. "Students choosing colleges: Understanding the matriculation decision at a highly selective private institution," Economics of Education Review, Elsevier, vol. 31(1), pages 1-8.
  3. Denny, Kevin & Doyle, Orla & O’Reilly, Patricia & O’Sullivan, Vincent, 2010. "Money, Mentoring and Making Friends : The Impact of a Multidimensional Access Program on Student Performance," The Warwick Economics Research Paper Series (TWERPS) 932, University of Warwick, Department of Economics.
  4. Meneses, Francisco & Blanco, Christian, 2010. "Financial Aid and Higher Education Enrollment in Chile: A Government Policy Analysis," MPRA Paper 23321, University Library of Munich, Germany.

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