Despite decades of growth in online education and a large number of students served by it, the scope of high quality empirical studies assessing distance education is very limited. In this project we study the incidence of Federal Title IV aid (including Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), the Federal Work Study Program, and the Federal Stafford Loan Program) and its effect on enrollment in online courses and degrees from postsecondary institutions. We study the incidence of Title IV aid through an extension of the “Bennett” hypothesis, to learn whether the students enjoy the benefits of the aid, or universities capture the aid by increasing college prices (tuition and fees) and decreasing the availability of institutional grants. The “Bennett” hypothesis has been studied previously in other contexts by Turner (2012), Cellini and Goldin (2012), Singell and Stone (2007), Long (2004), and many others.

We study separately the students who pursue their education exclusively online and those who include online courses in traditional education. To the best of our knowledge there are no prior empirical studies assessing whether students or institutions (or both in greater or lesser degrees) capture federal assistance and how this impacts matriculation in online courses and degrees.  We focus our attention on Title IV Aid because, in general, it is the major form of financial aid available to students (according to the U.S. Department of Education) and because it was not available to students enrolled in online universities, or those pursuing online degrees in traditional universities before 2005. Therefore, Title IV Aid provides a great venue to study the “treatment” effect of the policy change. We treat the Higher Education Reconciliation Act of 2005 (HERA) that permitted students pursuing online degrees to participate in Title IV programs as a natural experiment and employ a difference-in-differences estimator to answer the questions of interest.

The dataset we employ in this project is a restricted use repeated cross sectional data from the National Postsecondary Student Aid Study (NPSAS) 2003-04, NPSAS 2007-08, and NPSAS 2011-12. Three waves of NPSAS data include approximately 330,000 students from hundreds of postsecondary institutions representing the 50 U.S. states, Washington D.C., and Puerto Rico. The NPSAS survey combines student interviews with institutional records and government data to provide comprehensive socioeconomic, demographic, and financial information on students and detailed information about the institutions these students attend. Thus, the NPSAS is well suited for our study because this dataset is the only one that collects detailed information about both financial aid and online education before and after the Higher Education Reconciliation Act of 2005 (HERA).

Disclaimer: This research is supported by a grant from the American Educational Research Association which receives funds for its "AERA Grants Program" from the National Science Foundation under NSF Grant #DRL-0941014. Opinions reflect those of the author(s) and do not necessarily reflect those of the granting agencies.