Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion

33 Pages Posted: 7 Nov 2001  

Susan M. Dynarski

National Bureau of Economic Research (NBER); University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; University of Michigan at Ann Arbor - School of Education

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

Does student financial aid increase college attendance, or simply subsidize costs for infra-marginal students? Settling the question empirically is a challenge, because aid is correlated with many characteristics that influence schooling decisions. A shift in financial aid policy that affects some youth but not others can provide an identifying source of variation in aid. In 1982, Congress eliminated the Social Security student benefit program, which at its peak provided grants totaling $3.9 billion a year (amounts are in constant 2000 dollars) to one out of eight college students. I use difference-in-differences analysis to evaluate the effect of this program on schooling outcomes. Using the death of a parent to proxy for Social Security beneficiary status, I find that the college attendance of the affected group dropped by more than a third, and schooling by two-thirds of a year. Offering $1,000 of grant aid increases the probability of attending college by 3.6 percentage points and years of completed schooling by a tenth of a year. Aid eligibility also appears to have a positive impact on school quality.

Keywords: Economics - Microeconomics, Education Policy

Suggested Citation

Dynarski , Susan M., Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion (September 2001). KSG Faculty Research Working Paper Series RWP01-034. Available at SSRN: https://ssrn.com/abstract=288547 or http://dx.doi.org/10.2139/ssrn.288547

Susan M. Dynarski (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

University of Michigan at Ann Arbor - School of Education ( email )

610 East University Avenue
Ann Arbor, MI 48109-1259
United States

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