Federal and State Financial Aid During the Great Recession

Eric Bettinger, Betsy Williams

This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book How the Financial Crisis and Great Recession Affected Higher Education, Jeffrey Brown and Caroline Hoxby, editors
Conference held September 27-28, 2012
Forthcoming from University of Chicago Press

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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