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Testing Means-Tested Aid

Author

Listed:
  • Richard Murphy
  • Gill Wyness

Abstract

We estimate the effect of an unexpected institutional financial aid (IFA) award on student outcomes using administrative data collected from nine universities, exploiting variation in IFA schedules within and across university-entry cohorts. Each £1,000 of IFA during the first year of college increases the chances of completing that year by 1.4 percentage points, improves test scores by 0.059 standard deviations, and increases the chances of graduating with a good degree by 3.4 percentage points. We find that high-ability and low-income students benefit the most and calculate outcome-maximizing and cost-minimizing IFA schedules for each university.

Suggested Citation

  • Richard Murphy & Gill Wyness, 2023. "Testing Means-Tested Aid," Journal of Labor Economics, University of Chicago Press, vol. 41(3), pages 687-727.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/719995
    DOI: 10.1086/719995
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    Citations

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    Cited by:

    1. José Montalbán, 2023. "Countering Moral Hazard in Higher Education: The Role of Performance Incentives in Need-Based Grants," The Economic Journal, Royal Economic Society, vol. 133(649), pages 355-389.
    2. Camille Remigereau & Clara Schäper, 2024. "The Impact of Student Aid Eligibility on Higher Education Applications," Discussion Papers of DIW Berlin 2104, DIW Berlin, German Institute for Economic Research.
    3. Kenedi, Gustave, 2024. "Beyond the enrolment gap: financial barriers and high-achieving, low-income students' persistence in higher education," LSE Research Online Documents on Economics 126824, London School of Economics and Political Science, LSE Library.
    4. Judith M. Delaney & Paul J. Devereux, 2020. "How Gender and Prior Disadvantage Predict Performance in College," The Economic and Social Review, Economic and Social Studies, vol. 51(2), pages 189-239.
    5. Gustave Kenedi, 2024. "Beyond the enrolment gap: Financial barriers and high-achieving, low-income students' persistence in higher education," CEP Discussion Papers dp1987, Centre for Economic Performance, LSE.
    6. José Montalbán, 2019. "Countering moral hazard in higher education: The role of performance incentives in need-based grants," PSE Working Papers halshs-02160365, HAL.
    7. Solis, Alex, 2019. "Measuring the Effect of Student Loans on the College Dropout Rate," Working Paper Series 2019:8, Uppsala University, Department of Economics.
    8. Camille Remigereau & Clara Schäper, 2024. "The Impact of Student Aid Eligibility on Higher Education Applications," CESifo Working Paper Series 11592, CESifo.
    9. Albagli, Pinjas & García-Echalar, Andrés, 2025. "Rethinking student loan design: Evidence from a price-based reform in Chilean higher education," Economics of Education Review, Elsevier, vol. 109(C).
    10. Murphy, Richard & Scott-Clayton, Judith & Wyness, Gill, 2019. "The end of free college in England: Implications for enrolments, equity, and quality," Economics of Education Review, Elsevier, vol. 71(C), pages 7-22.
    11. Khaliliaraghi, Negar, 2025. "Housing by chance: The academic impacts of lottery-based access to student accommodation," Working Paper Series 2025:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Richard Murphy & Pedro Luís Silva, 2024. "Keeping It in the Family: Student to Degree Match," CESifo Working Paper Series 11075, CESifo.
    13. Paul Martin, 2024. "Understanding and addressing socioeconomic participation gaps in Higher Education in England," CEPEO Briefing Note Series 29, UCL Centre for Education Policy and Equalising Opportunities, revised Apr 2024.
    14. Nicholas A. Wright & Akeem Carter, 2024. "Who Benefits Most? Examining the Heterogeneous Impact of a Need-Based Grant Program in Jamaica," Working Papers 2412, Florida International University, Department of Economics.
    15. Bietenbeck, Jan & Leibing, Andreas & Marcus, Jan & Weinhardt, Felix, 2023. "Tuition fees and educational attainment," European Economic Review, Elsevier, vol. 154(C).
    16. Berens, Johannes & Henao, Leandro & Schneider, Kerstin, 2024. "Tuition fees and academic (in)activity in higher education: How did students adjust to the abolition of tuition fees in Germany?," Ruhr Economic Papers 1074, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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