How Financial Aid Affects Persistence

Eric Bettinger

NBER Working Paper No. 10242
Issued in January 2004
NBER Program(s):   ED

The Pell Grant program is the largest means-tested financial assistance available to postsecondary students across the United States, yet researchers have only limited evidence on the causal effects of these grants. This paper examines the effect of Pell grants on student persistence after the first year. The paper uses unique, student-level data from all public colleges in Ohio. The data include detailed financial data which allow me to identify small discontinuities in the Pell grant formula. I exploit these discontinuities to identify the causal effects of the voucher. The results based on discontinuity approaches suggest that Pell grants reduce college drop-out behavior. The results in this paper support other evidence that find a relationship between need-based aid and college completion (e.g. Dynarski 2002, Turner and Bound 2002).

(296 K)

Published:

• Hoxby, Caroline M. College choices: The economics of where to go, when to go, and how to pay for it, NBER Conference Report series. Chicago and London: University of Chicago Press, 2004. ,
• How Financial Aid Affects Persistence, Eric Bettinger, in College Choices: The Economics of Where to Go, When to Go, and How to Pay For It (2004), University of Chicago Press
  

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