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

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  • Larry Singell

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  • Mark Stater

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    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 2006

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    File URL: http://hdl.handle.net/10.1007/s11077-006-9030-7
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    Bibliographic Info

    Article provided by Springer in its journal Policy Sciences.

    Volume (Year): 39 (2006)
    Issue (Month): 4 (December)
    Pages: 379-403

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    Handle: RePEc:kap:policy:v:39:y:2006:i:4:p:379-403

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    Web page: http://www.springerlink.com/link.asp?id=102982

    Related research

    Keywords: Higher education policy; Economics of education; Financial aid; College enrollment; College completion;

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    1. Hungerford, Thomas & Solon, Gary, 1987. "Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 175-77, February.
    2. Robst, John & Keil, Jack & Russo, Dean, 1998. "The effect of gender composition of faculty on student retention," Economics of Education Review, Elsevier, vol. 17(4), pages 429-439, October.
    3. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
    4. Eric P. Bettinger & Bridget Terry Long, 2005. "Addressing the Needs of Under-Prepared Students in Higher Education: Does College Remediation Work?," NBER Working Papers 11325, National Bureau of Economic Research, Inc.
    5. DesJardins, S. L. & Ahlburg, D. A. & McCall, B. P., 1999. "An event history model of student departure," Economics of Education Review, Elsevier, vol. 18(3), pages 375-390, June.
    6. Ver Ploeg, Michele, 2002. "Children from disrupted families as adults: family structure, college attendance and college completion," Economics of Education Review, Elsevier, vol. 21(2), pages 171-184, April.
    7. Eric Bettinger, 2004. "How Financial Aid Affects Persistence," NBER Working Papers 10242, National Bureau of Economic Research, Inc.
    8. 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.
    9. 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.
    10. John Bound & Sarah E. Turner, 1999. "Going to War and Going to College: Did World War II and the G.I. Bill Increase Educational Attainment for Returning Veterans?," NBER Working Papers 7452, National Bureau of Economic Research, Inc.
    11. Boyd, Laura A., 1997. "Discrimination in mortgage lending: The impact on minority defaults in the Stafford Loan program," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 23-37.
    12. Schwartz, J. Brad, 1985. "Student financial aid and the college enrollment decision: the effects of public and private grants and interest subsidies," Economics of Education Review, Elsevier, vol. 4(2), pages 129-144, April.
    13. Neil S. Seftor & NSarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 336-352.
    14. Venti, Steven F. & Wise, David A., 1983. "Individual attributes and self-selection of higher education : College attendance versus college completion," Journal of Public Economics, Elsevier, vol. 21(1), pages 1-32, June.
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