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Financial aid, debt management, and socioeconomic outcomes: Post-college effects of merit-based aid

Scott-Clayton, Judith and Basit Zafar

Journal of Public Economics, 2019, vol. 170, issue C, 68-82

Abstract: Prior research has demonstrated that financial aid can influence both college enrollments and completions, but less is known about its post-college consequences. This study is the first to link college and financial aid information to credit bureau data later in life, enabling us to examine the impacts of grant aid on homeownership, neighborhood characteristics, and credit outcomes. We use a regression-discontinuity (RD) strategy to identify causal effects of the WV PROMISE scholarship, a broad-based state merit aid program, up to 10 years after college-entry. The RD is imperfect because our sample is limited to college students and the scholarship program increased enrollment, but there is little evidence of selection on observables at the threshold. We find that scholarship recipients near the test score cutoff for eligibility are more likely to earn a graduate degree, are more likely to own a home and live in higher-income neighborhoods. Effects on annual earnings and credit outcomes are similarly positive, but imprecise. These positive effects are primarily due to substantial reductions in time to degree, rather than to reduced student debt upon graduation.

Keywords: Financial aid; Educational outcomes; Higher education; Education policy (search for similar items in EconPapers)
JEL-codes: I22 I26 I28 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Financial aid, debt management, and socioeconomic outcomes: post-college effects of merit-based aid (2016) Downloads
Working Paper: Financial Aid, Debt Management, and Socioeconomic Outcomes: Post-College Effects of Merit-Based Aid (2016) Downloads
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