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To Apply or Not to Apply: FAFSA Completion and Financial Aid Gaps

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  • Michael S. Kofoed

    (United States Military Academy)

Abstract

In the United States, college students must complete the Free Application for Student Federal Aid (FAFSA) to access federal aid. However, many eligible students do not apply and consequently forgo significant amounts of financial aid. If students have perfect information about aid eligibility, we would expect that all eligible students complete FAFSA and no aid would go unclaimed. Using data from the National Postsecondary Student Aid Survey, I estimate a multinomial logit model which controls for all variables that contribute to aid eligibility and other student characteristics that may deter FAFSA completion. I find that students who are lower middle income, white, male and independent from parents are less likely to complete FAFSA even when they are eligible for aid. Using propensity score matching, I find that each year applicants forgo $9,741.05 in total aid (including grant and loan aid) which includes $1,281.00 of Pell Grants, $2,439.50 of the balance subsidized student loans, $1,986.65 of the balance of unsubsidized student loans, and $1,016.04 of institutional grants. These aid totals aggregate to $24 billion annually.

Suggested Citation

  • Michael S. Kofoed, 2017. "To Apply or Not to Apply: FAFSA Completion and Financial Aid Gaps," Research in Higher Education, Springer;Association for Institutional Research, vol. 58(1), pages 1-39, February.
  • Handle: RePEc:spr:reihed:v:58:y:2017:i:1:d:10.1007_s11162-016-9418-y
    DOI: 10.1007/s11162-016-9418-y
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    Cited by:

    1. Iryna Y. Johnson, 2019. "Destinations of Admitted Out-of-State Students: A Case of One Institution," Research in Higher Education, Springer;Association for Institutional Research, vol. 60(3), pages 315-337, May.
    2. Kofoed, Michael S., 2022. "Pell Grants and Labor Supply: Evidence from a Regression Kink," IZA Discussion Papers 15061, Institute of Labor Economics (IZA).
    3. Foote, Andrew, 2022. "Comparing earnings outcome differences between all graduates and title IV graduates," Economics of Education Review, Elsevier, vol. 89(C).
    4. Nor Balkish Zakaria & Muhammad Rasyid & Norazida Mohamed & Dalila Daud & Aida Maria Ismail, 2020. "Study Loan Defaults Among Tertiary Graduates," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 125-130, June.
    5. Kelly Ochs Rosinger, 2019. "Can Simplifying Financial Aid Offers Impact College Enrollment and Borrowing? Experimental and Quasi-Experimental Evidence," Education Finance and Policy, MIT Press, vol. 14(4), pages 601-626, Fall.
    6. Herber, Stefanie P. & Kalinowski, Michael, 2016. "Non-take-up of Student Financial Aid: A Microsimulation for Germany," VfS Annual Conference 2016 (Augsburg): Demographic Change 145727, Verein für Socialpolitik / German Economic Association.
    7. Estelle Herbaut & Koen Geven, 2019. "What Works to Reduce Inequalities in Higher Education? A Systematic Review of the (Quasi-)Experimental Literature on Outreach and Financial Aid," Sciences Po publications info:hdl:2441/527ht1a96e8, Sciences Po.
    8. Frauke H. Peter & Vaishali Zambre, 2014. "Wer studiert, ist informiert?: Studienentscheidungen und Informationsdefizite," DIW Roundup: Politik im Fokus 35, DIW Berlin, German Institute for Economic Research.
    9. French, Robert & Oreopoulos, Philip, 2017. "Behavioral barriers transitioning to college," Labour Economics, Elsevier, vol. 47(C), pages 48-63.
    10. Herber, Stefanie P. & Kalinowski, Michael, 2016. "Non-take-up of student financial aid: A microsimulation for Germany," BERG Working Paper Series 109, Bamberg University, Bamberg Economic Research Group.
    11. Benjamin L. Castleman & Lindsay C. Page, 2016. "Freshman Year Financial Aid Nudges: An Experiment to Increase FAFSA Renewal and College Persistence," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 389-415.
    12. H. Kenny Nienhusser & Toko Oshio, 2017. "High School Students’ Accuracy in Estimating the Cost of College: A Proposed Methodological Approach and Differences Among Racial/Ethnic Groups and College Financial-Related Factors," Research in Higher Education, Springer;Association for Institutional Research, vol. 58(7), pages 723-745, November.
    13. Estelle Herbaut & Koen Geven, 2019. "What Works to Reduce Inequalities in Higher Education? A Systematic Review of the (Quasi-)Experimental Literature on Outreach and Financial Aid," SciencePo Working papers Main hal-03456943, HAL.
    14. repec:hal:spmain:info:hdl:2441/527ht1a96e837pq2dubgo2953q is not listed on IDEAS
    15. Estelle Herbaut & Koen Geven, 2019. "What Works to Reduce Inequalities in Higher Education? A Systematic Review of the (Quasi-)Experimental Literature on Outreach and Financial Aid," Working Papers hal-03456943, HAL.
    16. Fernando Furquim & Kristen M. Glasener & Meghan Oster & Brian P. McCall & Stephen L. DesJardins, 2017. "Navigating the Financial Aid Process: Borrowing Outcomes among First-Generation and Non-First-Generation Students," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 69-91, May.
    17. Castleman, Benjamin L. & Page, Lindsay C., 2015. "Summer nudging: Can personalized text messages and peer mentor outreach increase college going among low-income high school graduates?," Journal of Economic Behavior & Organization, Elsevier, vol. 115(C), pages 144-160.
    18. Stefanie P. Herber & Michael Kalinowski, 2016. "Non-Take-Up of Student Financial Aid: A Microsimulation for Germany," SOEPpapers on Multidisciplinary Panel Data Research 844, DIW Berlin, The German Socio-Economic Panel (SOEP).
    19. Jabbari, Jason & Roll, Stephen & Bufe, Sam & McKay, Jessica, 2022. "“Take my word for it”: Group Texts and Testimonials Enhance State and Federal Student Aid Applications," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    20. Bergman, Peter & Denning, Jeffrey T. & Manoli, Dayanand, 2017. "Broken Tax Breaks? Evidence from a Tax Credit Information Experiment with 1,000,000 Students," IZA Discussion Papers 10997, Institute of Labor Economics (IZA).
    21. Kelli Bird & Benjamin L. Castleman, 2016. "Here Today, Gone Tomorrow? Investigating Rates and Patterns of Financial Aid Renewal Among College Freshmen," Research in Higher Education, Springer;Association for Institutional Research, vol. 57(4), pages 395-422, June.
    22. Laura M. Crispin & Michael Kofoed, 2019. "Does Time To Work Limit Time To Play?: Estimating A Time Allocation Model For High School Students By Household Socioeconomic Status," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 524-544, July.
    23. Mangrum, Daniel, 2022. "Personal finance education mandates and student loan repayment," Journal of Financial Economics, Elsevier, vol. 146(1), pages 1-26.

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    More about this item

    Keywords

    Student financial aid; FAFSA completion; Economics of higher education; Propensity score matching;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education

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