Federal and State Financial Aid during the Great Recession

Eric Bettinger, Betsy Williams

Chapter in NBER book How the Financial Crisis and Great Recession Affected Higher Education (2015), Jeffrey R. Brown and Caroline M. Hoxby, editors (p. 235 - 262)
Conference held September 27-28, 2012
Published in December 2014 by University of Chicago Press
© 2015 by the National Bureau of Economic Research

During the Great Recession, the maximum federal Pell award grew over 32 percent in three years, the fastest rate in its history. Our research examines how states' need-based financial aid policies responded to the economic downturn and this Pell program. Documenting tends in state and federal policies, we show a pattern that as many as half of the states have reduced the generosity of their financial aid programs during the Great Recession. This pattern of reducing generosity in the wake of increases in the Federal Pell Grant Program is not new, and our research shows that this potential fiscal federalism has become more common since 2000. We highlight specific policies in three states that illustrate this trend. We also use student-level data from Ohio to illustrate how students' net aid packages changed in response to the combined changes in federal and state aid policy, finding that the state policy had disproportionate effects on the students with most need.

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This paper was revised on December 19, 2013

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