Targeted financial aid geared for academically engaged students with financial need resulted in higher rates of college completion and a reduction in federal loans, according to an ongoing research study.
The study, conducted by Joshua Angrist and David Autor of the Massachusetts Institute of Technology (MIT) and Amanda Pallais of Harvard University, has been tracking Nebraska high school graduates who attend the state’s public colleges and universities and were eligible for a state-based merit scholarship.
Specifically, the analysis compares a randomized group recipients of a scholarship provided by Susan Thompson Buffett Foundation (STBF) — for Nebraska high school graduates who attend the state’s public colleges and universities and can provide more than $70,000 toward five years of study — to fellow students who were also eligible but were not awarded funds due to the number of applications exceeding the number of available awards.
By using this randomization that targeted a group of applicants that had similar levels of academic achievement, the report provides insight into a very specific, nearly identical group of students in terms of their academic performance, which allowed the researchers to garner the causal effects of the scholarship.
Among the main findings, the report found a 17% difference between students who after a four-year period were able to graduate having paid off their federal loans, with 46% of award recipients being loan-free as compared to only 29% of those who did not receive the award having no federal loan.
Further, the study found that this targeted aid cut dropout rates in half over a four-year period, with enrollment for scholarship recipients falling by 13% from a students’ first semester through the fall semester of students’ fourth year, as compared to 18% for students who did not receive the scholarship.
“These gains are largest for low-income, Pell grant–eligible applicants, and for applicants with lower high school test scores,” the authors wrote. “Our findings regarding high school performance on standardized tests highlight the paradox of merit aid: awards based on past achievement are less likely to generate large gains in college completion rates than awards made to applicants who appear less ready for college.”
The results are part of an ongoing research study, which intends to include more data for future analysis as subsequent cohorts of students reach the date of expected college completion.
“As the current cohorts age, we will continue to study the scholarship program’s effects across demographic groups and on postgraduate labor market outcomes,” the authors write. “Evidence on the long-term effects of financial support on both individuals and groups should also grow more conclusive. We will update this site as we obtain new results.”
Publication Date: 10/5/2020