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Does the Format of a Financial Aid Program Matter? The Effect of State In-Kind Tuition Subsidies

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  • Bridget Terry Long

Abstract

Does the format of a financial aid program influence how it affects college decisions? This paper examines this question by focusing on state appropriations to public postsecondary institutions. While these funds subsidize tuition costs for in-state students, the in-kind format of the aid an resulting price gap between public and private colleges could also affect choices between colleges. The paper analyzes this possible effect utilizing a conditional logistic choice model, which exploits extensive match-specific information between individuals and nearly 2,700 colleges. Using estimates of how price, quality, and distance influence college decisions, I examine the impact of several dissimilar state subsidy regimes and simulate how decisions would change if the aid were awarded in other ways. The results suggest that the level and distribution pattern of state subsidies strongly influence decisions. When in-kind subsidies are large, students appear to choose public colleges even if the gap in resources between public and private options is substantial. If the aid were instead distributed as a credit applicable to any in-state college, up to 29 percent more students would prefer to attend private four-year colleges. The results also suggest that the in-kind subsidies create incentives for students to favor public four-year colleges over two-year institutions.

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  • Bridget Terry Long, 2003. "Does the Format of a Financial Aid Program Matter? The Effect of State In-Kind Tuition Subsidies," NBER Working Papers 9720, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9720
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    Cited by:

    1. Schmidt, Alejandro & Ortúzar, Juan de Dios & Paredes, Ricardo D., 2019. "Heterogeneity and college choice: Latent class modelling for improved policy making," Journal of choice modelling, Elsevier, vol. 33(C).
    2. Adam Altmejd & Andrés Barrios-Fernández & Marin Drlje & Joshua Goodman & Michael Hurwitz & Dejan Kovac & Christine Mulhern & Christopher Neilson & Jonathan Smith, 2021. "O Brother, Where Start Thou? Sibling Spillovers on College and Major Choice in Four Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 136(3), pages 1831-1886.
    3. Hurwitz, Michael & Goodman, Joshua Samuel & Smith, Jonathan & Fox, Julia, 2015. "The relationship between siblings’ college choices: Evidence from one million SAT-taking families," Scholarly Articles 22805380, Harvard Kennedy School of Government.
    4. Pertti Haaparanta & Ravi Kanbur & Tuuli Paukkeri & Jukka Pirttilä & Matti Tuomala, 2022. "Promoting education under distortionary taxation: equality of opportunity versus welfarism," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(2), pages 281-297, June.
    5. Goodman, Joshua & Hurwitz, Michael & Smith, Jonathan, 2014. "Sibling (Non) Rivalry: The Relationship between Siblings' College Choices," Working Paper Series rwp14-028, Harvard University, John F. Kennedy School of Government.
    6. Andrés Barrios-Fernández, 2022. "Neighbors' Effects on University Enrollment," American Economic Journal: Applied Economics, American Economic Association, vol. 14(3), pages 30-60, July.
    7. Bridget T. Long, 2004. "The Impact of Federal Tax Credits for Higher Education Expenses," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 101-168, National Bureau of Economic Research, Inc.
    8. Bridget Terry Long, 2014. "The Financial Crisis and College Enrollment: How Have Students and Their Families Responded?," NBER Chapters, in: How the Financial Crisis and Great Recession Affected Higher Education, pages 209-233, National Bureau of Economic Research, Inc.
    9. George B. Bulman & Caroline M. Hoxby, 2015. "The Returns to the Federal Tax Credits for Higher Education," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 13-88.
    10. Broner, Fernando A. & Gaston Gelos, R. & Reinhart, Carmen M., 2006. "When in peril, retrench: Testing the portfolio channel of contagion," Journal of International Economics, Elsevier, vol. 69(1), pages 203-230, June.
    11. Mulyaningsih, Tri & Dong, Sarah & Miranti, Riyana & Daly, Anne & Purwaningsih, Yunastiti, 2022. "Targeted scholarship for higher education and academic performance: Evidence from Indonesia," International Journal of Educational Development, Elsevier, vol. 88(C).
    12. Hashem Dezhbakhsh & John A. Karikari, 2010. "Enrollment At Highly Selective Private Colleges: Who Is Left Behind?," Contemporary Economic Policy, Western Economic Association International, vol. 28(1), pages 94-109, January.
    13. Dickson, Lisa & Pender, Matea, 2013. "Do in-state tuition benefits affect the enrollment of non-citizens? Evidence from universities in Texas," Economics of Education Review, Elsevier, vol. 37(C), pages 126-137.
    14. Christopher Neilson & Adam Altmejd & Andres Barrios-Fernandez & Marin Drlje & Dejan Kovac, 2019. "Siblings' Effects on College and Major Choices: Evidence from Chile, Croatia and Sweden," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
    15. Mikołaj Czajkowski & Tomasz Gajderowicz & Marek Giergiczny & Gabriela Grotkowska & Urszula Sztandar-Sztanderska, 2020. "Choosing the Future: Economic Preferences for Higher Education Using Discrete Choice Experiment Method," Research in Higher Education, Springer;Association for Institutional Research, vol. 61(4), pages 510-539, June.
    16. Eric Bettinger & Bridget Terry Long, 2004. "Shape Up or Ship Out: The Effects of Remediation on Students at Four-Year Colleges," NBER Working Papers 10369, National Bureau of Economic Research, Inc.
    17. Eric P. Bettinger & Bridget Terry Long, 2009. "Addressing the Needs of Underprepared Students in Higher Education: Does College Remediation Work?," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    18. Eric Bettinger & Oded Gurantz & Laura Kawano & Bruce Sacerdote, 2016. "The Long Run Impacts of Merit Aid: Evidence from California’s Cal Grant," NBER Working Papers 22347, National Bureau of Economic Research, Inc.
    19. Monks, James, 2009. "The impact of merit-based financial aid on college enrollment: A field experiment," Economics of Education Review, Elsevier, vol. 28(1), pages 99-106, February.
    20. Lindsay C. Page & Judith Scott-Clayton, 2015. "Improving College Access in the United States: Barriers and Policy Responses," NBER Working Papers 21781, National Bureau of Economic Research, Inc.
    21. Gary T. Henry & Kevin C. Bastian & C. Kevin Fortner & David C. Kershaw & Kelly M. Purtell & Charles L. Thompson & Rebecca A. Zulli, 2014. "Teacher Preparation Policies and Their Effects on Student Achievement," Education Finance and Policy, MIT Press, vol. 9(3), pages 264-303, July.
    22. Page, Lindsay C. & Scott-Clayton, Judith, 2016. "Improving college access in the United States: Barriers and policy responses," Economics of Education Review, Elsevier, vol. 51(C), pages 4-22.
    23. Rajashri Chakrabarti & Joydeep Roy, 2013. "Merit Aid, Student Mobility, and the Role of College Selectivity," Staff Reports 641, Federal Reserve Bank of New York.
    24. Niu, Sunny Xinchun & Tienda, Marta & Cortes, Kalena, 2006. "College selectivity and the Texas top 10% law," Economics of Education Review, Elsevier, vol. 25(3), pages 259-272, June.

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    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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