Aiding or Dissuading? The Effects of Exhausting Eligibility for Need-Based Aid on Bachelor's Degree Attainment and Time to Completion

Abstract

While studies find that need-based financial aid can increase college access, persistence, and completion, little is known about how tuition subsidies affect students after they have enrolled in college and how losing aid impacts postsecondary attainment. I shed light on these questions by exploiting recent changes to federal Pell Grant eligibility rules that reduced the lifetime availability for aid from 9 to 6 full-time-equivalent years. Using longitudinal data from the University System of Georgia, I compare student outcomes before versus after the rule change for Pell recipients who were affected and unaffected by the new lifetime limit. The results indicate that aid exhaustion required students to borrow more, which in turn accelerated their time to completion. The rule change increased the probability of term-over-term re-enrollment and bachelor’s degree completion within 8 years by 2-3 percentage points. Students who had at least one year to adjust to the new rule before exhausting aid eligibility were also much more likely to graduate before experiencing aid losses. Importantly, I find no evidence that the rule change decreased the overall probability of degree attainment. The findings therefore indicate that setting limits on the availability of need-based grants can accelerate time to completion for students who have demonstrated a sustained commitment to finishing college.