Due to rising costs and declining affordability, many students have to work while attending college.  However, there are major concerns that such activities detract from their academic pursuits.  On the other hand, labor market experience may help prepare students for future jobs and careers.  The federal government takes a major role in subsidizing the wages of college students and spent over $1 billion on the work-study program in 2010-11 (College Board, 2011), yet little is known about how working during the school year impacts college student outcomes.  A limited number of previous studies have explored the causal effect of working on college student outcomes.  Two studies exploring the effect of off-campus employment find that it has a negative effect on students’ GPAs (Dadger 2010, Stinebrickner & Stinebrickner 2003).  However, it is possible that working in an on-campus job subsidized by the federal work-study program would not have the same negative effect.  To our knowledge only one previous study has explored the causal effect of the federal work-study program.  Scott-Clayton (2011) finds some evidence that, for students in West Virginia public university system, working on-campus has negative effects on GPA, persistence and time to graduation, but positive effects on cumulative credits earned, though her estimates are not statistically significant.

Building upon this work by Scott-Clayton (2011), our paper uses the variation in the allocation of federal work-study funds across public universities in Ohio to estimate the effect of federal work-study on college student outcomes, including college GPA, credits earned, and persistence.  We use two methodological approaches to address the issue: differences-in-differences and instrumental variables.  Our preliminary results suggest that working on-campus has a negative effect on GPA and persistence for freshmen attending one of the 13 four-year public universities in Ohio.  On the other hand, our estimates of the effect of on-campus employment on first year cumulative credits earned are positive and statistically significant.  Moreover, our subgroup analysis suggests that the receipt of work-study may have differential effects by ethnicity and financial dependency status.  We find some evidence that work-study has a positive effect on academic outcomes for Black students and students who are not financially dependent on their parents.

As the cost of college tuition continues to rise, more and more students may choose to work during the school year rather than borrow money to make-up for insufficient grant aid.   It is important for policy makers to understand how this need to work will impact students’ success and progress through college.  Moreover, if working on-campus, in a job subsidized by the federal work-study program, is less detrimental to student outcomes than working off campus, then this may be a worthwhile investment for scarce federal aid dollars.