Abstract
This article exploits a natural experiment to estimate the effects of need-based aid policies on first-year college persistence rates. In fall 2006, Ohio abruptly adopted a new state financial aid policy that was significantly more generous than the previous plan. Using student-level data and very narrowly defined sets of students, I estimate a difference-in-differences model to identify the program effects. Students who benefited from the program received awards about US$800 higher than they would have received under the prior program. These students’ drop-out rates fell by 2% as a result of the program. The new program also increased the likelihood that students attend 4-year campuses and increased their first-year grade point averages. The program may not have been cost-effective given the combination of its generosity and inability to target the marginal students who would be most sensitive to financial aid.
Keywords
Get full access to this article
View all access options for this article.
