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Amid a national debate about how the federal financial aid system could be improved, a new study shows that an increased amount of need-based aid with no strings attached can have positive, long-term effects for low-income students.

While past research has suggested that need-based grant eligibility positively impacts college enrollment rates, the paper published by the National Bureau of Economic Research delves deeper. It provides strong evidence that students who qualify for need-based grants (above the federal Pell Grant) are not only more likely than their peers of similar socioeconomic backgrounds to enroll in a public four-year university, but also show an increased probability to stay continuously enrolled in college, graduate within six years and accumulate credits at a quicker pace. (An abstract of the study is available here.)

For their study, “Looking Beyond Enrollment: College Access, Persistence, and Graduation,” the researchers Benjamin Castleman and Bridget Terry Long investigated how the Florida Student Access Grant, a need-based state aid program, affected Florida students who graduated from high school in 2001.

Each year, the Florida Department of Education sets a “maximum expected family contribution,” which was $1,590 during the 2000-1 academic school year. Students were eligible to receive a Florida Student Access Grant -- to be used at any two- or four-year institution -- only if their expected family contribution was below this amount. Those who were eligible for the grant, as well as those who were just above the threshold, were still eligible to receive the federal Pell Grant (up to $1,750).

To find out if an increased amount of aid would positively correlate with student enrollment and other outcomes, the researchers compared students who were eligible for the $1,300 FSAG grant with students whose expected family contribution amounts were just above the cutoff, but were still eligible for Pell Grants. So presumably the students who received an FSAG grant came from similar low-income backgrounds as the ones who did not.

Though all of the students included in the study were eligible for some sort of aid, the students who were eligible for $1,300 more in grant aid eligibility had better outcomes. This, Castleman said, is an important distinction.

“Our paper isn’t looking at aid vs. no aid,” said Castleman, an acting assistant professor of education at the University of Virginia. “We’re looking at how a greater amount of aid affects students. In the context of need-based aid, increasing the aid which students were eligible for had a range of positive outcomes.”

The additional $1,300 in grant aid eligibility increased the probability of immediate enrollment at a public, four-year university by 12 percent. Those students were also likelier -- by 4.3 percentage points -- to stay continuously enrolled through the spring semester of their freshman year.

Castleman said that just looking a continuous enrollment can be a “coarse measure” of students’ progression toward a degree. For example, the study notes, a student who completes two semesters with full course loads but then took a semester off would be further along than a continuously enrolled student who only took a couple of courses each semester.

To investigate student progression in more detail, the researchers examined whether FSAG eligibility affected students’ cumulative credit completion through their first four years of college. They found that one year after high school, the state grant-eligible students earned 1.1 more credits than did their peers just above the cutoff, and that the margin widened each year after. By the third year, they earned 3.85 more credits than did students above the cutoff.  

“Put in different terms, students just below the cutoff were more than one course ahead of students just above the cutoff after three years,” the study says.

Eligibility for the Florida state grant did not increase the likelihood of a student earning a bachelor’s degree in four years, but eligible students were 3.2 percentage points more likely to earn a bachelor’s degree within five years. They were 4.6 percentage points, or 22 percent, more likely to earn a bachelor’s degree within six years.

Much of the debate about financial aid has centered around whether grants that are tied to a student’s academic performance more positively affect a student’s college performance and completion. In a 2013 National Bureau of Economic Research paper, two well-regarded scholars of federal financial aid policy, Susan Dynarski and Judith Scott-Calyton, wrote that "dollars with strings attached produce larger effects than dollars alone." Some policy makers have supported the idea, while others have warned that need-based aid paired with academic incentives could put low-income, minority students at an unfair disadvantage.

In one way, the results from “Looking Beyond Enrollment” suggest that there is not a need for linking grant aid with academic performance incentives, since students who received the Florida grant had no incentives and were still successful.

But Castleman said that conclusion cannot be drawn from the data, since the study did not compare students who had received aid with incentives to those who had received aid without incentives. He said he thinks it will be important to examine how academic incentives within need-based programs would affect student outcomes and to find out which types of students would benefit from that type of award.

Castleman and Long did find that the FSAG grant had the biggest impact on students who graduated in the top 25 percent of their high school graduating class.

“I think our work suggests that there is a population of kids who are from economically disadvantaged backgrounds but have worked hard in high school to make college a reality,” Castleman said. “Giving additional aid has a profound impact in helping these students not only get to college, but to also earn a degree down the road.”

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