Association for Public Policy Analysis & Management

College dropout is widespread across the U.S. postsecondary system, and there is mounting evidence that many students withdraw after making substantial academic progress (Bowen, Chingos, & McPherson, 2009; Mabel & Britton, 2016; Shapiro et al., 2014). A natural question to ask is why students are dropping out so close to the finish line.

In this study, I examine the impact of losing need-based aid on college persistence late into college. Empirically, whether late-stage aid facilitates progress to completion remains an open question. To the extent that aid increases the likelihood that students complete a college degree, the effect may be driven by early subsidies that set students on a path to graduation which they would follow in the absence of continued financial support. Alternatively, financial constraints may pose a barrier to attainment along the entire pathway to completion. The findings in this study tease out whether the effect of need-based aid on persistence varies with time spent in college and informs an important design consideration of grant programs: the length of time for which aid should be offered.

I shed light on the impact of losing eligibility for need-based aid by exploiting a recent change to federal Pell Grant eligibility rules which reduced the lifetime cap on aid from 18 to 12 semesters beginning in the 2012-13 academic year. Using eleven years of annual data from the October Current Population Survey and a difference-in-differences research design that compares income-eligible Pell students impacted by the rule change to income-eligible students not affected by the lifetime cap reduction, I find that eliminating Pell Grant eligibility decreased late-stage persistence to college by 14-15 percentage points, or approximately 4 points per $1,000 of grant aid. The spike in dropouts was concentrated among students who had completed several years of credits and were previously enrolled full-time at four-year institutions.

The evidence in this study is therefore consistent with financial constraints posing a persistent barrier to educational attainment along the entire pathway to college completion. The findings also suggest that student decisions to withdraw from college can be highly sensitive to policy changes that provoke unanticipated financial shocks.

REFERENCES

Bowen, W. G., Chingos, M. M., & McPherson, M. S. (2009). Crossing the finish line: Completing college at America’s public universities. Princeton, NJ: Princeton University Press.

Mabel, Z. A., & Britton, T. (2016). Leaving late: Understanding the extent and predictors of college late departure. Cambridge, MA. Unpublished manuscript.

Shapiro, D., Dundar, A., Yuan, X., Harrell, A., Wild, J., & Ziskin, M. (2014). Some College, No Degree: A National View of Students with Some College Enrollment, but No Completion. Herndon, VA: National Student Clearinghouse Research Center.