Grants Can Improve Student College Success

April 1, 2013

Financial aid has long been evaluated for its effectiveness at promoting college attendance. But the utility of college at promoting social mobility hinges on students completing years of college credits. Facilitating college persistence among students from low-income families appears to require offsetting the growing costs associated with college attendance. Need-based financial grants are a popular mechanism with which to lower those costs.

The Wisconsin Scholars Grant (WSG) program intends to increase the size of students’ financial aid packages and reduce student debt.  The privately funded program is distributed  by lottery among eligible first-year undergraduates attending Wisconsin’s 13 public universities.

"Children from low-income families now face a nine percent chance of attaining a bachelor's degree. That low rate of college attainment is substantially attributable to high rates of college dropout."

A recent analysis of the program by UW-Madison’s Sara Goldrick-Rab and colleagues¹ provides evidence that need-based financial grants are modestly effective at inducing students to remain enrolled, earn slightly more credits, and get somewhat better grades, and that these effects are likely stronger when students receive more aid.

Goldrick-Rab is associate professor of educational policy studies and sociology at the UW-Madison. She and colleagues examined the impact of offering an additional $3,500 grant (renewable for up to five years) on the college continuation decisions of Pell Grant recipients. They collected longitudinal data for four cohorts of students eligible to participate in the WSG program (nearly 15,000 people in total).

The study concluded that, on average, offering students the new grant generated small, positive impacts on their retention rates, credit completion, and grade point average. Effects appeared strongest at the institutions where typical academic performance among Pell recipients leaves the most room for improvement.  

The WSG program offers Pell-eligible students a $3,500 grant per year for up to five years, with a total potential maximum award of $17,500 per student. This amounts to 20.4% of their estimated costs of attendance, and 69.9% of students' annual demonstrated financial need. Students are eligible for the Wisconsin Scholars Grant if they are Wisconsin residents who attended and graduated from a state public high school within three years of matriculating to one of the state's 13 public universities, where they enrolled for at least 12 credits (full time), completed the Free Application for Federal Student Aid, and qualified for a federal Pell Grant, while still possessing calculated unmet need (net of all grant aid) of at least $1. In fall 2008, the average adjusted gross income of students' parents was just under $30,000 and the average expected family contribution was $1,631. Thus most students came from families living above the poverty line, yet qualifying as "working poor" because they earned less than 200% of the federal poverty threshold.

Students receiving more aid during their first year of college stayed enrolled longer. Specifically, the study found a 2.8 to 4.1 percentage point increase in retention to the second year of college accruing to a $1,000 increase in total financial aid.

The Wisconsin Scholars Grant (WSG) was initiated in 2008 and is supported by a $168 million endowment from the Fund for Wisconsin Scholars, making it one of the largest need-based grant programs in the state. This study provided impact estimates based on the entering cohorts of 2008, 2009, 2010, and 2011. The most detailed estimates focused on data from the program’s first cohort: The study considered three years of outcomes for cohorts 1 and 2, two years for cohort 3, and one year for cohort 4.

Examining effects across multiple cohorts helped to provide a sense of the reliability of the results and provided some space to consider how program implementation relates to effectiveness.

The study found that treatment impacts appear to fade over time. This may be attributable to the sharp declines in the number of students continuing to get the grants over time, related to the criteria for continual receipt. The estimated impact on retention grew weaker and became non-significant by semester four. There were no detectable effects by the third year of college.  Effects were also negligible where the grant simply supplanted students’ loans—the effects were far more noticeable when the grant added money to the students’ aid packages, rather than reducing loans.

Goldrick-Rab points out that monetary interventions are “rarely simple drops of cash from the sky.” Grant money reaches students through a process, one that can affect the monetary and non-monetary value of the money.   A closer examination of how packaging practices vary across institutions may yield greater insights into which changes would be most effective.

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¹ Douglas Harris is associate professor of economics and university-endowed chair in public education at Tulane University.  Robert Kelchen is a doctoral candidate in educational policy studies at the UW-Madison.  James Benson is a program officer at the Institute of Education Sciences.

Adapted from the working paper, “Need-Based Financial Aid and College Persistence: Experimental evidence from Wisconsin,” by Sara Goldrick-Rab, Douglas N. Harris, Robert Kelchen, and James Benson.