Integrity versus access? The effect of federal financial aid availability on postsecondary enrollment

Rajeev Darolia

Journal of Public Economics, 2013, vol. 106, issue C, 101-114

Abstract: It is generally believed that access to financial aid will increase the likelihood that students will attend and graduate from college. There is a surprising lack of research, however, on the consequences when postsecondary institutions lose eligibility to disburse financial aid. This paper provides among the first causal estimates of institution-level financial aid funding loss on enrollment and composition of student bodies. I implement a dynamic regression discontinuity design using a multi-year rule that restricts institutions' eligibility to offer federal aid such as Pell Grants and subsidized loans when alumni's loan repayment rates are below allowed thresholds. Results suggest that financial aid loss discourages enrollment at for-profit institutions and institutions that offer programs of two years or less. The decline in enrollment appears to be driven by fewer new enrollees, particularly at for-profit colleges. I find less conclusive evidence that ineligibility to disburse federal financial aid substantially alters student body composition. This research is particularly relevant considering recently proposed federal rulemaking that will further limit the number of institutions eligible to disburse financial aid based on additional student loan debt repayment requirements. Restrictions such as these are intended to protect students and the integrity of federal aid programs, but may also have implications for access to higher education.

Keywords: Financial aid; For-profit colleges; Student loan default; College access; Dynamic regression discontinuity (search for similar items in EconPapers)
JEL-codes: H52 I22 I28 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:106:y:2013:i:c:p:101-114

DOI: 10.1016/j.jpubeco.2013.08.001

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