Financial Aid Accelerates College Graduation

Financial aid can affect who goes to college. But how does financial aid affect students already in college who would attend even without the aid? In a new study, Jeffrey T. Denning (Brigham Young University) examines the effect of additional financial aid on these students. He finds that additional aid speeds up graduation for university seniors and increases persistence to the next year for sophomores and juniors.

The study considers additional aid awarded to students declared financially independent from their parents. This occurs for students who turn 24 years old before January 1 while attending school. This rule allowed Denning to look at administrative data from all public universities in Texas to compare students who were recently declared independent based on their age to students who just missed the cut-off. The results? Students from wealthier backgrounds see larger increases in financial aid. However, relatively poor students see larger graduation effects from the additional aid.

The findings of this study suggest that financial aid affects the success of students already in college. The results also suggest that financial independence policy could be altered to increase graduation outcomes simply by allocating more aid to poorer students.

Read the full study in the Journal of Human Resources: “Born Under a Lucky Star: Financial Aid, College Completion, Labor Supply, and Credit Constraints,” by Jeffrey T. Denning.