Financial Aid Package Composition and Postsecondary Outcomes for Low-income Students: Evidence from the Spartan Advantage Program

This study examines the impact of substituting loans with need-based gift aid on postsecondary outcomes for low-income students. Using a regression discontinuity design based on the income eligibility threshold for Michigan State University's Spartan Advantage Program (SPAD), I estimate how altering the composition of a financial aid package—specifically, replacing loans with gift aid—affects college outcomes for students just below the federal poverty line. While the change in aid composition did not affect persistence or graduation rates, it did influence students' major choices. SPAD recipients were less likely than nonrecipients to remain in STEM fields between their admissions application—submitted before receiving their financial aid package—and graduation. Further, they were more likely to move toward majors that better reflected their academic preparation, indicating improved fit between students and their field of study. These findings suggest that changes in aid composition can meaningfully shape academic choices, even in the absence of effects on persistence or degree completion.