You are here:

Monetary substitution of loans, earnings, and need-based aid in postsecondary education: The impact of Pell Grant eligibility
ARTICLE

, Peabody College, United States ; , College of Education, United States

Economics of Education Review Volume 70, Number 1, ISSN 0272-7757 Publisher: Elsevier Ltd

Abstract

By applying a regression discontinuity design to national data of students at four-year colleges, this study identifies the average substitution effects of exogenously received increases of grant aid on hours of paid labor, earnings, and borrowing while in college. Results confirm students substitute grant aid for both paid labor and borrowing. An average increase of $1100 in grant aid reduces weekly job hours by 1.5–2 h per week for women, corresponding to a decline in annual earnings of $850, and reduces borrowing by an average of $300–$400 dollars among all students. We find limited evidence of grant aid's impact on academic outcomes.

Citation

Evans, B.J. & Nguyen, T.D. (2019). Monetary substitution of loans, earnings, and need-based aid in postsecondary education: The impact of Pell Grant eligibility. Economics of Education Review, 70(1), 1-19. Elsevier Ltd. Retrieved January 27, 2021 from .

This record was imported from Economics of Education Review on June 3, 2019. Economics of Education Review is a publication of Elsevier.

Full text is availabe on Science Direct: http://dx.doi.org/10.1016/j.econedurev.2019.02.004

Keywords

References

View References & Citations Map
  1. Alon, S. (2011). Who benefits most from financial aid? The Heterogeneous effect of need-based grants on students’ college persistence. Social Science Quarterly, 92(3), pp. 807-829.
  2. Angrist, J., Hudson, S., Pallais, A., & Autor, D. (2014). Leveling up: Early results from a randomized evaluation of post-secondary aid. Available online: http://www.nber.org/papers/w20800.
  3. Angrist, J., Lang, D., & Oreopoulos, P. (2009). Incentives and services for college achievement: Evidence from a randomized trial. American Economic Journal: Applied Economics, 1(1), pp. 136-163.
  4. Avery, C., & Turner, S. (2012). Student loans: Do college students borrow too much-or not enough?. Journal of Economic Perspectives, 26, pp. 165-192.
  5. Barr, A. (2016). Fighting for education: The effect of the post-9/11 gi bill on degree attainment..
  6. Bartik, T., Hershbein, B., & Lachowska, M. (2015). “The effects of the Kalamazoo Promise Scholarship on college enrollment, persistence, and completion.” Upjohn Institute Working Paper 15-229.
  7. Becker, G.S. (1962). Investment in human capital. Journal of Political Economy, 70(5), pp. 9-49.
  8. Bettinger, E. (2004). How financial aid affects persistence., pp. 207-238. Available online: http://www.nber.org/chapters/c10101.pdf.
  9. Bettinger, E., Gurantz, O., Kawano, L., & Sacerdote, B. (2016). The Long Run Impacts Of Merit Aid: Evidence from California's Cal Grant. Available online: http://www.nber.org/papers/w22347.
  10. Boatman, A., Evans, B.J., & Soliz, A. (2017). Understanding loan aversion in education: Evidence from high school seniors, community college students, and adults. AERA Open, 3(1).
  11. Brock, T., & Richburg-Hayes, L. (2006). Paying for persistence. Early results of a louisiana scholarship program for low-income parents attending community college. Available online: http://eric.ed.gov/?id=ED491719.
  12. Broton, K.M., Goldrick-Rab, S., & Benson, J. (2016). Working for college The causal impacts of financial grants on undergraduate employment. Educational Evaluation and Policy Analysis, 38(3), pp. 477-494.
  13. Cabrera, A.F., Nora, A., & Castaneda, M.B. (1992). The role of finances in the persistence process: A structural model. Research in Higher Education, 33(5), pp. 571-593.
  14. Caetano, G.S., Palacios, M., and Patrinos, H.A.. 2011. “Measuring aversion to debt: An experiment among student loan candidates.” World Bank Policy Research Working Paper No. 5737. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1895966.
  15. Cameron, A., & Miller, D.L. (2015). A practitioner's guide to cluster-robust inference. Journal of Human Resources, 50(2), pp. 317-372.
  16. Carruthers, C.K., & Özek, U. (2016). Losing HOPE: Financial aid and the line between college and work. Economics of Education Review, 53, pp. 1-15.
  17. Carruthers, C.K., and Welch, J.. 2017. “Not whether but where? Pell Grants and college choices.” Working Paper. Retrieved at http://web.utk.edu/∼ccarrut1/CarruthersWelch_JUNE2017.pdf.
  18. Castleman, B.L., & Long, B.T. (2016). Looking beyond enrollment: The causal effect of need-based grants on college access, persistence, and graduation. Journal of Labor Economics, 34(4), pp. 1023-1073. Available online: http://www.journals.uchicago.edu/doi/full/10.1086/686643.
  19. Clotfelter, C.T., Hemelt, S.W., & Ladd, H.F. (2016). Multifaceted aid for low-income students and college outcomes: Evidence from North Carolina. Available online: http://www.nber.org/papers/w22217.
  20. Crisp, G., & Nora, A. (2010). Hispanic student success: Factors influencing the persistence and transfer decisions of latino community college students enrolled in developmental education. Research in Higher Education, 51(2), pp. 175-194.
  21. Dadgar, M. (2012). “The academic consequences of employment for students enrolled in community college. CCRC Working Paper No. 46.” Community College Research Center, Columbia University. http://eric.ed.gov/?id=ED533521.
  22. DesJardins, S.L., & McCall, B.P. (2014). The impact of the Gates Millennium Scholars Program on college and post-college related choices of high ability, low-income minority students. Economics of Education Review, 38, pp. 124-138.
  23. Deming, D., & Dynarski, S. (2010). College Aid., pp. 283-302.
  24. Denning, J.T. (2018). Born under a lucky star: Financial aid, college completion, labor supply, and credit constraints. Journal of Hduman Resources.
  25. Denning, J.T., Marx, B.M., & Turner, L.J. (2017). ProPelled: The effects of grants on graduation, earnings, and welfare.
  26. Denning, J.T., & Turley, P. (2017). Was that SMART? Institutional financial incentives and field of study. Journal of Human Resources, 52(1), pp. 152-186.
  27. Dowd, A.C. (2004). Income and financial aid effects on persistence and degree attainment in public colleges. Education Policy Analysis Archives, 12(21), p. N21.
  28. Dundes, L., & Marx, J. (2006). Balancing work and academics in college: Why do students working 10 to 19 hours per week excel?. Journal of College Student Retention: Research, Theory and Practice, 8(1), pp. 107-120.
  29. Dynarski, S., & Scott-Clayton, J. (2013). Financial aid policy: Lessons from research. Available online: http://www.nber.org/papers/w18710.
  30. Evans, B.J. (2017). SMART money: Do financial incentives encourage college students to study science?. Education Finance and Policy, 12(3), pp. 342-368.
  31. Evans, B., Nguyen, T., Tener, B., & Thomas, C. (2017). Federal Pell Grant eligibility and receipt: Explaining nonreceipt and changes to EFC using national and institutional data. Journal of Student Financial Aid, 47(3), p. 4.
  32. Goldrick-Rab, S., Kelchen, R., Harris, D.N., & Benson, J. (2016). Reducing income inequality in educational attainment: Experimental evidence on the impact of financial aid on college completion 1. American Journal of Sociology, 121(6), pp. 1762-1817. Available online: http://www.journals.uchicago.edu/doi/abs/10.1086/685442.
  33. Henry, G.T., Rubenstein, R., & Bugler, D.T. (2004). Is HOPE eough? Impacts of receiving and losing merit-based financial aid. Educational Policy, 18(5), pp. 686-709.
  34. Hossler, D., Ziskin, M., Gross, J.P.K., Kim, S., & Cekic, O. (2009). Student aid and its role in encouraging persistence., pp. 389-425.
  35. Imbens, G.W., & Lemieux, T. (2008). Regression discontinuity designs: A guide to practice. Journal of Econometrics, 142(2), pp. 615-635.
  36. Jacob, B. (2002). Where the boys aren't: Non-cognitive skills, returns to school and the gender gap in higher education. Economics of Education Review, 21(6), pp. 589-598.
  37. King, T., & Bannon, B.P. (2002). At what cost? The price that working students pay for a college education. Washington, D.C.: United States Public Interest Research Group.
  38. Lee, D.S., & Lemieuxa, T. (2010). Regression discontinuity designs in economics. Journal of Economic Literature, 48(2), pp. 281-355.
  39. Leppel, K. (2002). Similarities and differences in the college persistence of men and women. The Review of Higher Education, 25(4), pp. 433-450.
  40. Marx, B.M., & Turner, L.J. (2018). Borrowing trouble? Human capital investment with opt-in costs and implications for the effectiveness of grant aid. American Economic Journal: Applied Economics, 10(2), pp. 163-201.
  41. McCrary, J. (2008). Manipulation of the running variable in the regression discontinuity design: A density test. Journal of Econometrics, 142(2), pp. 698-714.
  42. Mendoza, P., Mendez, J.P., & Malcolm, Z. (2009). Financial aid and persistence in community colleges: Assessing the effectiveness of federal and state financial aid programs in Oklahoma. Community College Review, 37(2), pp. 112-135.
  43. Page, L.C., Kehoe, S.S., Castleman, B.L., & Shadewo, G.A. (2017). More than dollars for scholars: The impact of the dell scholars program on college access, persistence, and degree attainment. Journal of Human Resources.
  44. Park, R.S.E., & Scott-Clayton, J. (2017). “The impact of Pell Grant eligibility on community college students’ financial aid packages, labor supply, and academic outcomes.” Center for Analysis of Postsecondary Education and Employment Working Paper.
  45. Partridge, M.A. (2013). Topics in the economics of education: quasi-experimental studies on Florida's educational system.
  46. Rubin, R.B. (2011). The Pell and the Poor: A regression-discontinuity analysis of on-time college enrollment. Research in Higher Education, 52(7), pp. 675-692.
  47. Schudde, L., & Scott-Clayton, J. (2016). Pell Grants as performance-based scholarships? An examination of satisfactory academic progress requirements in the nation's largest need-based aid program. Research in Higher Education, 57(8), pp. 943-967.
  48. Scott-Clayton, J. (2011). On money and motivation a quasi-experimental analysis of financial incentives for college achievement. Journal of Human Resources, 46(3), pp. 614-646.
  49. Scott-Clayton, J. (2011). The causal effect of federal work-study participation quasi-experimental evidence from West Virginia. Educational Evaluation and Policy Analysis, 33(4), pp. 506-527.
  50. Scott-Clayton, J., & Minaya, V. (2016). Should student employment be subsidized? Conditional counterfactuals and the outcomes of work-study participation. Economics of Education Review, 52, pp. 1-18.
  51. Soliz, A., & Long, B.T. (2016). Does Working Help or Hurt College Students? The Effects of Federal Work-Study Participation on Student Outcomes. Retrieved from http://capseecenter.org/wp-content/uploads/2016/11/Soliz-Long-Causal-Effect-FWS-11-7-16_final.pdf.
  52. Stater, M. (2009). The impact of financial aid on college GPA at three flagship public institutions. American Educational Research Journal, 46(3), pp. 782-815.
  53. Stinebrickner, R., & Stinebrickner, T.R. (2003). Working during school and academic performance. Journal of Labor Economics, 21(2), pp. 473-491.
  54. Turner, L.J. (2013). The Road to Pell is paved with good intentions: The economic incidence of federal student grant aid. Available online: http://econweb.umd.edu/~turner/Turner_FedAidIncidence.pdf.
  55. United States Department of Education (2015). “Federal Supplemental Educational Opportunity Grant (FSEOG) Program. Retrieved from https://www2.ed.gov/programs/fseog/index.html.
  56. Wine, J., Janson, N., & Wheeless, S. (2011). 2004/09 Beginning Postsecondary Students Longitudinal Study (BPS 04/09). Full-Scale Methodology Report.
  57. Zhang, L., Hu, S., & Sensenig, V. (2013). The effect of Florida's Bright Futures program on college enrollment and degree production: An aggregated-level analysis. Research in Higher Education, 54(7), pp. 746-764.

These references have been extracted automatically and may have some errors. Signed in users can suggest corrections to these mistakes.

Suggest Corrections to References