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Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion

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  • Dynarski, Susan

    (Harvard U)

Abstract

Does student financial aid increase college attendance, or simply subsidize costs for infra-marginal students? Settling the question empirically is a challenge, because aid is correlated with many characteristics that influence schooling decisions. A shift in financial aid policy that affects some youth but not others can provide an identifying source of variation in aid. In 1982, Congress eliminated the Social Security student benefit program, which at its peak provided grants totaling $3.9 billion a year (amounts are in constant 2000 dollars) to one out of eight college students. I use difference-in-differences analysis to evaluate the effect of this program on schooling outcomes. Using the death of a parent to proxy for Social Security beneficiary status, I find that the college attendance of the affected group dropped by more than a third, and schooling by two-thirds of a year. Offering $1,000 of grant aid increases the probability of attending college by 3.6 percentage points and years of completed schooling by a tenth of a year. Aid eligibility also appears to have a positive impact on school quality.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp01-034.

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Date of creation: Oct 2001
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Handle: RePEc:ecl:harjfk:rwp01-034

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  1. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
  2. Joshua D. Angrist & Guido W. Imbens, 1995. "Average Causal Response with Variable Treatment Intensity," NBER Technical Working Papers 0127, National Bureau of Economic Research, Inc.
  3. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
  4. Susan M. Dynarski, 1999. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," NBER Working Papers 7422, National Bureau of Economic Research, Inc.
  5. 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.
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  8. Manski, Charles F., 1989. "Schooling as experimentation: a reappraisal of the postsecondary dropout phenomenon," Economics of Education Review, Elsevier, vol. 8(4), pages 305-312, August.
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  11. Dynarski, Susan, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 629-62, September.
  12. Joshua D. Angrist, 1993. "The effect of veterans' benefits on education and earnings," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(4), pages 637-652, July.
  13. Sarah E. Turner & John Bound, 2002. "Closing the Gap or Widening the Divide: The Effects of the G.I. Bill and World War II on the Educational Outcomes of Black Americans," NBER Working Papers 9044, National Bureau of Economic Research, Inc.
  14. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
  15. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1996. "Why Are Retirement Rates So High at Age 65?," NBER Chapters, in: Advances in the Economics of Aging, pages 61-82 National Bureau of Economic Research, Inc.
  16. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  17. Kane, Thomas J, 1994. "College Entry by Blacks since 1970: The Role of College Costs, Family Background, and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 878-911, October.
  18. Aigner, Dennis J., 1973. "Regression with a binary independent variable subject to errors of observation," Journal of Econometrics, Elsevier, vol. 1(1), pages 49-59, March.
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