Association for Public Policy Analysis & Management

There is a growing consensus in the higher education literature that financial aid matters for college access and success, particularly for low-income students.  However, there is a dearth of research on how financial aid policies can affect the distribution of aid dollars across different student groups.  Given the large and growing income gap in college graduation, understanding how policies affect who receives aid is arguably as important as understanding the degree to which students benefit from aid.  In this paper, I investigate how a particular policy affects the distribution of financial aid: state-specific requirements for the Free Application for Federal Student Aid (FAFSA).  Previous literature shows that the FAFSA is a significant barrier to college entry and persistence, particularly for low-income students (Dynarski & Scott Clayton, 2006; Bettinger et al, 2012; Castleman & Page, 2014).  Most states not only require students to file the FAFSA to be eligible for their grant programs, but also mandate deadlines by which students must file the FAFSA.  The modal state deadline is March 1^st, a month and a half before the deadline for filing federal income taxes.  For a variety of social and behavioral reasons, low-income students file the FAFSA later than their higher-income peers: the average filing date for college freshmen in the bottom income quartile is 46 days later than students in the top income quartile.  Therefore, I hypothesize that earlier state deadlines have a regressive impact on the distribution of state grant aid.  I test this hypothesis using student-level data from four National Postsecondary Study Aid Survey (NPSAS) waves (1999-00, 2003-04, 2007-08, and 2011-12), and exploiting variation in application deadlines within states, over-time.  Using a variety of socio-economic measures, my preliminary results show that earlier state deadlines result in state grant aid being distributed to less needy students.  For example, moving a deadline 30 days earlier results in the average expected family contribution (EFC) of state grant recipients increasing by $342, or 5.7%.  Likewise, a 30-day earlier deadline results in state grant recipients being 4.2% less likely to be first-generation college students.  I perform validity checks to show that these results are not driven by (1) earlier deadlines making low-income students less likely to enroll in any college; or (2) deadline changes associated with other changes in state grant programs, such as generosity, funding, or eligibility requirements.  In future work, I will simulate how alternative application policies could mitigate the regressive effects of FAFSA deadlines on the distribution of aid.