Low-income and low-SAT scoring students who participate in the Federal Work-Study (FWS) program reap the largest benefit, indicating the potential for better outcomes if funding were better targeted, according to a working paper from the Center for Analysis of Postsecondary Education and Employment.
The paper, written by Judith Scott-Clayton and Veronica Minaya, examines the impact student employment subsidies like FWS can have on students’ long-term outcomes compared to the impact of working an unsubsidized job or not working at all.
According to the paper, FWS students are more likely to be employed during the school year than non-FWS students by “only” 48 percentage points. “While this is a large and statistically significant impact, it also indicates that a slight majority of participants would have worked at another job even if they had not received FWS,” the authors note.
Notably, the results of the authors’ analysis show several significant positive effects on academic and labor outcomes among those who work during college, with the most concentrated amount among students who would have worked another job were they not in FWS. For example, FWS students were 5.2 percentage points more likely to earn their bachelor’s degree within six years and 3.7 percentage points more likely to be employed after six years than other working students.
While there are several positive impacts of FWS, the paper also notes that FWS students “appear to accumulate substantially higher debt burdens” than students who work unsubsidized jobs or who do not work, borrowing $6,263 more in cumulative undergraduate debt. According to the authors, FWS students are 21 percentage points more likely to take on student loan debt in their first year, with a 16 percentage point increase in the likelihood of having borrowed after six years.
“It is striking that such strong debt effects remain even after matching students on individual characteristics including EFC … and financial need after grants, as well as on institutional characteristics such as selectivity, tuition, and tuition squared,” the authors write. “The magnitude and persistence of these results suggest that student loans, rather than being a substitute for student employment, may be packaged with FWS funds by aid officers in a formulaic way.”
The authors write that the finding can be partly explained by the requirement that students seeking FWS file the FAFSA, adding that when they limited their analysis to only FAFSA-filing students “the magnitude of the loan impacts is cut approximately in half, but still remain large and highly significant.”
The authors conclude by noting that the “effectiveness of Federal Work-Study funds might be increased by modifying the allocation formula – which currently provides disproportionate support to students at elite private institutions – to better target lower-income and lower-scoring students.”
Publication Date: 9/30/2014