The targeting and packaging of student aid and its effect on attrition

Abstract

This paper investigates three basic but largely unexamined issues affecting the student financial aid system in public four-year universities. These are the targeting of overall aid, the packaging of aid for different groups of aid recipients and the role of financial aid in motivating persistence. Institutional records and students surveys are used to investigate whether aid actually reaches the target population and whether various combinations of grants, loans, and work-study awards are allocated according to student ability to pay. Markov analysis is used to examine whether the targeting and packaging of aid is stable and consistent over time. Finally, logit analysis is used to examine relationships between financial aid and attrition rates over three successive years to assess whether aid promotes persistence among economically disadvantaged undergraduate students. The study finds that the student financial system, in keeping with established guidelines on targeting and packaging, distributes aid mainly to low income students and that aid effectively compensates for the disadvantage of low income by making low income students as likely to persist in college as higher income students who do not receive aid.