Associate Professor of Economics and Social Studies, Harvard University
Does financial aid increase college attendance and completion? Selection bias and the high implicit tax rates imposed by overlapping aid programs make it hard to tell. This paper reports initial findings from a randomized evaluation of a large privately-funded scholarship program for applicants to Nebraska's public colleges and universities. Our research design answers the challenges of aid evaluation with random assignment of aid offers and a strong first stage for aid received. The randomly-selected treatment group enjoyed much larger aid packages than did the control group. This in turn appears to have boosted enrollment and persistence, while also shifting many applicants from two- to four-year schools. Awards offered to nonwhite applicants, to those with relatively low ACT scores, and to applicants who targeted less-selective four-year programs (as measured by admissions rates) generated the largest gains in enrollment and persistence. Effects were much smaller for applicants predicted to have stronger outcomes in the absence of treatment. Thus, awards enabled groups with historically-low college attendance to ‘level up’, equalizing enrollment and persistence rates with their traditionally college-bound peers, particularly at four-year programs and more selective institutions. Awards offered to prospective community college students had little effect on college enrollment or the type of college attended.