Estimating the relationship between calculated financial need and actual aid received using quarter of birth instruments

Ling Shao

Economics of Education Review, 2014, vol. 42, issue C, 165-174

Abstract: When calculating financial need, the FAFSA does not consider the parental income of students who turn 24 years old. This paper uses the student's quarter of birth interacted with the treated cohort to instrument for financial need. Using the interaction mitigates many of the concerns regarding quarter of birth instruments. A dollar increase in financial need is associated with 15 cents in federal grants and 47 cents in loans. However, the relationship between financial need and institutional aid is, on average, small and statistically insignificant. The exception is that institutions with large endowments do allocate more aid to more-needy students.

Keywords: Student financial aid; Educational finance (search for similar items in EconPapers)
JEL-codes: I22 I23 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:42:y:2014:i:c:p:165-174

DOI: 10.1016/j.econedurev.2014.07.003

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