Extra Financial Aid Only Helps Students Likely to Drop Out

Aug 31, 2011

Can financial aid to students with a low likelihood for persistence in college help decrease their drop-out rate? Findings from a new study suggest just that. Authors of the report propose that these findings have several policy implications and suggest a need for more effective distribution of need-based financial aid.

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By Mercy McKee

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A Little Extra Went a Long Way for Some

In early July, the Institute for Research on Poverty at the University of Wisconsin at Madison released its report, 'Conditional Cash Transfers and College Persistence: Evidence from a Randomized Need-Based Grant Program.' The report was based on a study conducted over three years at 13 public universities in Wisconsin in order to estimate the impact of financial aid among Pell Grant recipients on college persistence. The study took 1,200 first-time, traditional-age students who had received Pell Grants and broke them into two groups: one group of 600 who received an additional private grant of up to $1,750 per semester for up to ten semesters, and a control group of 900 who received no additional grant.

The students were also assigned to one of three groups based on several variables, including their parents' level of education, standardized-test scores and parents' help in the financial aid application process. These groups indicated students' likelihood of persisting in college for three years as low, medium or high.

The study found that the additional grant had a positive impact on students considered least likely to persist. Only 55% of the students who were least likely to persist and did not receive the additional grant remained in college at least three years, while 72% of the students who did receive the grant had remained in school.

Students most likely to persist had, however, quite different results. While 94% of non-recipients were still in school three years later, only 79% of grant recipients expected to persist were still in school, indicating that they may have been negatively affected by the additional financial aid.

In light of these results, and with building pressure to reduce the cost of the Pell Grant program, authors of the study had several proposals for policy change. In addition to increasing the required number of credit hours to qualify for the program and reducing the maximum award, authors suggest re-designing the program so that all students receive the same grant in the first year, and then re-directing funds over time towards those facing the most challenges to finishing college.

Read about how the debt ceiling compromise is preserving the Pell Grant program, but passing the cost on to grad students.

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