Private scholarship offers — offers that come from private sector companies, community organizations, philanthropists, foundations, etc. — can improve enrollment and persistence, according to a new study published by the National Bureau of Economic Research.
The study examines the link between financial aid and college attendance and completion through a randomized evaluation of the Susan Thomas Buffett Foundation (STBF), a large charitable organization with a private aid program that supports more than 3,000 students each year. STBF offers grants to high school seniors in Nebraska who are interested in attending public colleges and universities in the state. Grant recipients, called Buffett Scholars, can receive up to $60,000, which covers tuition and fees for up to five years at any Nebraska public college.
To evaluate the program and how effective grant aid is, the authors of the study randomly awarded more than 2,000 scholarships. While outside scholarships often end up reducing institutional aid or replacing federal self-help aid, an agreement between STBF and Nebraska's public colleges acts to minimize the amount of institutional aid that gets reduced. They found that the amount of grant aid Buffett Scholars received was “substantially” increased by their STBF scholarship offers, rising by about $6,200 on average the first year and $6,400 in the second year. According to the author, the increased aid represents a net increase of 91 cents in grant aid for every dollar awarded by STBF, with offsetting reductions in government loans of 29 cents per dollar awarded and Federal Work-Study aid of six cents per dollar awarded.
The aid from SBTF also impacted students’ behaviors, slightly increasing the likelihood of enrollment in the first year and increasing enrollment at four-year institutions. When the authors looked at the impact on sophomore enrollment, they found “more substantial” gains, with a 7.2 percentage point increase in overall sophomore enrollment and a 14-point increase in enrollment at four-year institutions. Rates also increased among groups that traditionally show low rates of persistence, including a 20-point increase in four-year enrollment for nonwhite applicants and students with low ACT scores. A boost in persistence rates was seen among male applicants and students with low high school as well.
“On balance, STBF scholarships substantially equalized enrollment and persistence rates across groups, enabling students with low expected persistence to ‘level up’ with their traditionally college-bound peers,” the authors wrote. However, the authors found that the STBF scholarship awards had little impact on applicants who had their sights set on community colleges.
The findings of the study “highlight the paradox of merit aid: awards based on past achievement are likely to generate smaller gains than awards made to applicants who appear less likely to be college-ready,” they conclude.
Publication Date: 1/20/2015