Association for Public Policy Analysis & Management

Given the importance of obtaining a post-secondary degree for economic success, recent news media accounts have called attention to the escalating costs of higher education (see e.g., Lewin 2013; Hildreth 2014). Research has consistently shown that federal programs have reduced the burden of these higher education costs and have increased college access for many groups, including the low-income population, recent high-school graduates, middle-class families, and older students. However, much less is known about college completion. The proposed paper is a follow-up to Dynarski’s 2003 American Economic Reviewarticle on financial investment and college attendance and completion. In this paper, Dynarski uses the National Longitudinal Survey of Youth, 1979 cohort (NLSY) and a difference-in-differences model to estimate the changes in college enrollment for children who finished high school near the phase-out of the Social Security Student Benefit (SSSB) Program. Dynarksi shows that a $1000 increase in higher education subsidies increased the likelihood of college attendance by about 3.6 percentage points by age 23. Receiving less attention, Dynarksi also estimates the total education completed by age 28 writing that her result “suggests that aid eligibility did not simply speed up investment in schooling but also raised its optimal level.”

This work re-investigates the latter claim using the same NLSY cohort, but using more recent data that capture the respondent’s educational attainment later in life. One limitation of Dynarski’s publication is the relatively small number of observed used in identification. By measuring educational attainment once the children are older, we increase the size of the “treatment group”. In addition, we also use cases from the Panel Study of Income Dynamics (PSID) that overlap with the NLSY cohorts to add precision to the estimates of the effect on higher education. 

Using the NLSY79 and a difference-in-differences model, our preliminary results show that the SSSP program had no overall effect on the educational attainment of recipients. However, these initial results do not consider the distributional effects of the program. Additional analyses show that the elimination of the program for individuals aged 18 to 22 created large reductions in the likelihood of Associate’s degree receipt. In contrast, the benefits had small and statistically insignificant effects on earning a Bachelor’s degree. We test the robustness of our result using similar cohorts from the PSID, and our results are consistent with those found in the NLSY79.

The findings from this study have important policy implications. In his 2015 State of the Union address, President Obama proposed a plan to provide two years of community college education at no cost to anyone who maintains a minimum grade point average and makes steady progress toward their degree. Our results suggest that federal investment in higher education could substantially increase Associate’s degree completion rates, i.e., this proposed program would be well targeted.  Equally interesting is the null finding for the Bachelor’s degree. One likely explanation is that the SSSB program crowded out other sources of payment.