1 / 22

Losing HOPE

Losing HOPE. Financial Aid and the Line Between College and Work February 2013 Celeste K. Carruthers and Umut Ozek University of Tennessee and AIR/CALDER. Essential Questions. Financial aid has been shown to increase college enrollment, persistence, and graduation 1

octavia-barnett
Download Presentation

Losing HOPE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Losing HOPE Financial Aid and the Line Between College and Work February 2013 Celeste K. Carruthers and Umut Ozek University of Tennessee and AIR/CALDER

  2. Essential Questions • Financial aid has been shown to increase college enrollment, persistence, and graduation1 • Caveat: results are not universal2 • Why is financial aid important for students? • Why do students work so hard to avoid losing aid? 3 • Non-pecuniary loss aversion? • Financial need? 1Dynarski 2000,2003; Deming & Dynarski 2009; Scott-Clayton 2011; Castleman & Long 2012 2 Hansen 1983; Cohodes & Goodman 2012; Sjoquist & Winters 2012 3 Cornwell et al. 2005; Scott-Clayton 2011

  3. Contributions • To date, we know that students who lose Georgia's HOPE accumulate fewer credits and receive fewer degrees (Henry et al. 2004) and tend to be concentrated in more technical majors (Dee & Jackson 1999). • We provide the first causal evidence of students' college/work substitution patterns in the wake of losing financial aid. • Preview: less college, more work • Beyond the scope of this paper: normative statements on optimal scholarship retention policies.

  4. The Tennessee HOPE scholarship • Financed by the state lottery • First available to fall 2004 freshman (and some sophomores) • Up to $4,000/year grant for four-year students, $2,000 for two-year students • Low eligibility threshold and (comparatively) high renewal threshold. • Renewed with continuous enrollment, GPA of 2.75 after 24 hours, 3.0 after 48, 72, and 96 hours. • About 1/2 of HOPE scholars lose their scholarship midway through college.

  5. Data • Administrative records for 2003-2006 entering cohorts in Tennessee two-year and four-year institutions, followed through fall 2008. • Scholarship status, credits attempted per term, major(s), college GPA, demographics, distance from permanent address. • Merged with FAFSA and ACT records for income and ACT controls. • Merged with quarterly earnings data for every quarter (enrolled or not), 2003-2008. • Merged with full-time undergraduate tuition and fees (IPEDS).

  6. Descriptive Statistics

  7. Descriptive Statistics

  8. Empirical Strategy • 1(losthopeit) – equal to one in semesters after HOPE loss. • η1(t-t0)*1(beforeit) + η2(t-t0)*1(afterit)- local linear function of time until/since HOPE loss • βt*GPAit- college GPA, effect allowed to vary by t • αi, αt- individual and semester sequence FE • Zitγ- time-varying student and institution controls, linear time trend.

  9. Empirical Strategy • Hit - value of HOPE scholarship in 2005$.

  10. Identifying Variation in HOPE • 2004-2006 cohorts • Deviations from mean HOPE status or value, across and within students. • Within-student, across αt. • Within-semester sequence, across αi • Within-student variation is from the failure to renew HOPE. • 2003 cohort • Deviations from mean HOPE status or value, across and within students. • This cohort was eligible to gain HOPE in 2004, then held to renewal standards thereafter.

  11. Internal Validity Challenges • Students who lose HOPE are of lower ability. • αicontrols for this class of heterogeneity. • Students about to lose HOPE are on Yit trajectories that confound treatment with other factors. • η1(t-t0)*1(beforeit) + η2(t-t0)*1(afterit) controls for pre-loss and post-loss trends common to students who lose the scholarship. • Typically, GPA starts low and climbs just before HOPE loss.

  12. College GPA before and after HOPE loss

  13. Credits attempted before and after HOPE loss (regression-adjusted)

  14. Exit rates before and after HOPE loss (regression-adjusted)

  15. Results – 2004-2006 cohorts

  16. The impact of HOPE loss versus an equivalent tuition increase on attempted credits

  17. Results – 2004-2006 cohorts

  18. Results – 2004-2006 cohorts

  19. Results – 2003 cohort

  20. Inference • For students who stay in college after HOPE, the first term without HOPE is associated with • 0.996 fewer credits (7.6% of the mean) • $170 additional earnings (6.4% of the mean) • 5.4 ppt higher likelihood of not declaring a major (23.2% of the mean) • Little to no impact on labor force participation. • Extensive margin impacts appear much stronger than intensive margin impacts. • In the first term without HOPE, there is a 7.0 ppt higher likelihood of exiting college for the workforce without a degree (58.8% of the mean exit rate)

  21. Heterogeneous Impacts of Losing HOPE: 2004-2006 cohorts

  22. Conclusions • Loss of financial aid decreases engagement with college and shifts the college/work margin towards work. • Attempted hours decrease. • The likelihood of declaring a major decreases. • Earnings increase. • The propensity to leave college increases. • Findings are pronounced for the lower-income half of students, and for students who start in two-year colleges. • Implications: money matters, especially at the extensive margin of college enrollment.

More Related