Issues Relating to Higher Education Financing
Friday, Jan. 5, 2018 8:00 AM - 10:00 AM
- Chair: Richard Mansfield, University of Colorado-Boulder
Do Local Communities Response to State Merit Aid Programs?
AbstractIn more than half of U.S. states over the last two decades, the implementation of merit aid programs has dramatically reduced tuition expenses for college-bound students who attend in-state colleges. In this paper, we analyze a hitherto-unexplored impact of these programs: whether merit aid programs led to changes in state support for higher education and K-12 education, and whether and how school districts responded to such changes. Exploiting the staggered adoption of state merit aid programs as a natural experiment, we employ two methodologies to study whether this has been the case: a difference-in-differences model and a synthetic control estimation strategy. We find robust evidence that implementation of merit aid programs led to an economically (and statistically) significant decline in state funding for K-12 education, underlining a potential trade-off between limited state resources and competing priorities. The decline in state aid was mostly offset through increases in local revenues by school districts, underscoring the importance of a compensatory relationship between these two forms of revenues. In states that implemented a `strong' merit aid program, these effects, particularly on state revenue, were of both an economically and statistically significant larger magnitude relative to states with weaker programs.
Nudging at a National Scale: Experimental Evidence From a FAFSA Completion Campaign
AbstractAcross a variety of policy domains, complicated application processes and complex eligibility information interfere with people accessing beneficial resources and programs (Bertrand, Mullainathan, and Shafir, 2004; Hastings and Weinstein, 2008; Madrian and Shea, 2001). In postsecondary education, researchers have long recognized that complexities associated with the Free Application for Federal Student Aid (FAFSA) can deter college-ready students from matriculating or succeeding in higher education (Dynarski and Scott-Clayton, 2006; King, 2004).
Behaviorally-informed messaging campaigns have become popular as a strategy to help people overcome such barriers (Bergman, 2013; Castleman, 2015; Kraft and Rogers, 2014: Loeb and York, 2015). Text and email messages sent to students at critical financial aid junctures can generate substantial improvements in college access and persistence at low cost (Castleman and Page, 2015; Castleman and Page, 2016; ideas42, 2016; Page, Castleman, and Meyer, 2016). Such research has, however, been implemented at a relatively small scale and important open questions remain about the mechanisms that drive these campaigns’ effects.
We contribute new evidence about both scalability of and mechanisms underlying informational campaigns’ efficacy by evaluating a randomized financial aid nudge initiative for 450,000 high school seniors registered with the Common Application, a national non-profit organization. Preliminary data suggests such nudges work at national scale to increase college enrollment, particularly among students whose parents did not attend college. Messages that encourage students to make a plan for completing the FAFSA appear more effective than messages about its financial value or identity priming. Though point estimates are small, scope of the intervention implies it caused thousands of students to enroll in college. By fall 2017 we will be able to measure the impact of this intervention on college persistence and to more precisely evaluate which form of messaging was most effective.
The Effect of State Funding for Postsecondary Education on Long-Run Student Outcomes
AbstractMost public colleges and universities rely heavily on state financial support for operation. As state budgets have tightened over the past several decades, appropriatiations for higher education have declined substantially. Despite concerns expressed by policymakers and scholars that the declines in state support have reduced the return to education investment for public sector students, little evidence exists that can identify the causal effect of these funds on long-run student outcomes. We present the first such analysis in the literature using new data that leverages the merger of two rich datasets: consumer credit records from New York Fed's Consumer Credit Panel (CCP) sourced from Equifax and administrative college enrollment and attainment data from the National Student Clearinghouse. We overcome identification concerns related to the endogeneity of state appropriation variation using an instrument that interacts the baseline share of total revenue that comes from state appropriations at each public institution with yearly variation in state-level appropriations per college-age resident. This ``shift-share'' instrument exploits the fact that a statewide change in appropriations for higher education will have larger effects on institutions that are more reliant on state funds. Our focus is on state appropriation shocks that occur when students are already enrolled in college, which allows us to abstract from extensive margin effects. We examine the effect of state appropriations among 25-30 year olds and 30-35 year olds, separately by whether students initially enrolled in a four-year or two-year institution. Our findings indicate that state appropriation shocks students experience in college have long-lasting impacts on their life outcomes into their mid-30s. Among students whose first college is a four-year institution, state appropriation increases during college lead to a lower probability of having any student loan debt, lower student debt balances, higher credit scores, and increased likelihood of owning a car and a home.
University of Chicago
University of Maryland
- J0 - General
- I2 - Education and Research Institutions