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How Financial Aid Affects Persistence

In: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It

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  • Eric Bettinger

Abstract

The Pell Grant program is the largest means-tested financial assistance available to postsecondary students across the United States, yet researchers have only limited evidence on the causal effects of these grants. This paper examines the effect of Pell grants on student persistence after the first year. The paper uses unique, student-level data from all public colleges in Ohio. The data include detailed financial data which allow me to identify small discontinuities in the Pell grant formula. I exploit these discontinuities to identify the causal effects of the voucher. The results based on discontinuity approaches suggest that Pell grants reduce college drop-out behavior. The results in this paper support other evidence that find a relationship between need-based aid and college completion (e.g. Dynarski 2002, Turner and Bound 2002).
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Suggested Citation

  • Eric Bettinger, 2004. "How Financial Aid Affects Persistence," NBER Chapters,in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 207-238 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:10101
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    1. 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.
    2. 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.
    3. Ronald G. Ehrenberg & Daniel R. Sherman, 1984. "Optimal Financial Aid Policies for a Selective University," Journal of Human Resources, University of Wisconsin Press, pages 202-230.
    4. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, pages 279-288.
    5. Charles F. Manski, 1993. "Adolescent Econometricians: How Do Youth Infer the Returns to Schooling?," NBER Chapters,in: Studies of Supply and Demand in Higher Education, pages 43-60 National Bureau of Economic Research, Inc.
    6. Joshua D. Angrist, 1988. "Grouped Data Estimation and Testing in Simple Labor Supply Models," Working Papers 614, Princeton University, Department of Economics, Industrial Relations Section..
    7. DesJardins, S. L. & Ahlburg, D. A. & McCall, B. P., 1999. "An event history model of student departure," Economics of Education Review, Elsevier, vol. 18(3), pages 375-390, June.
    8. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, pages 279-288.
    9. Stephen L. DesJardins & Dennis A. Ahlburg & Brian P. McCall, 2002. "Simulating the Longitudinal Effects of Changes in Financial Aid on Student Departure from College," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 653-679.
    10. John Bound & Sarah Turner, 2002. "Going to War and Going to College: Did World War II and the G.I. Bill Increase Educational Attainment for Returning Veterans?," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 784-815, October.
    11. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, June.
    12. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, pages 733-740.
    13. Tobias, J.L., 2000. "Are Return to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability-Earnings Relationship," Papers 00-01-12, California Irvine - School of Social Sciences.
    14. Angrist, Joshua D., 1991. "Grouped-data estimation and testing in simple labor-supply models," Journal of Econometrics, Elsevier, pages 243-266.
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    JEL classification:

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

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