The Effects of Need-Based Aid on College Enrollment and Success Among Low-Income Students

Abstract

States are increasingly concerned about higher education spending and determining whether they are getting their “money’s worth” from financial aid programs. Researchers have documented correlations between financial aid and college persistence (St. John 1991), finding that grants increase persistence (Bettinger 2004), scholarships have a larger effect on retention than grants, and that all forms of financial aid increase student outcomes (Avery & Hoxby 2004; DesJardins et al. 2002). Unfortunately most financial aid research focuses on students enrolled in 4-year colleges and comparing students across high, medium, and low SES. Moreover, most research on persistence and retention is focused on persistence at individual colleges and universities and does not focus on system wide persistence and degree completion (Adelman 1999). There is little research investigating the affects of financial aid among low-SES students and even less investigating the ways in which need-based financial aid affects student outcomes for low-income students. Using FAFSA data from 2003-04 Illinois college-bound students and longitudinal data from the Illinois Monetary Assistance Program and National Student Clearinghouse data, we investigate the relationships between need-based financial aid and college enrollment, persistence, and completion among low-income students. We conclude with a discussion of the ways in which these results can inform policy aiming to increase college attendance and lower attrition among low-income students.