Association for Public Policy Analysis & Management

Since the 2008-09 economic recession, financial barriers have posed a substantial obstacle to college access for middle and low income families because of the decline in personal income and rapidly increasing tuition (Bettinger & Williams, 2013). Accordingly, federal and State financial aids have played crucial roles of lowering financial barriers against accessing to higher education for low-income families especially (McDonough et al., 2007). Due to continuous rising college tuition costs, however, the goal of financial aid college has changed and emphasized completion and attainment beyond enrollment (Turner, 2004). For example, the 21^st Century Scholars program, one of Indiana state’s financial aids, made a reform of shifting the program’s incentives from enrollment of college to completion of college, by adding completion requirements of taking minimum 30 credits successfully each year to renew it, which applied to 2013-1014 cohorts entering colleges. It also approached to the broad merit based aid from need-based one by increasing applicant eligibility that requires the initial minimum GPA from 2.0 to 2.5 and must receive a Core 40 diploma to improve academic preparation (ICHE, 2013). So, this paper looks at how the policy change in the 21^st Century Scholars program affects students’ not only enrollment and retention but also completion and how the effects are different by family income, race/ethnicity, and college sector. We collected data from 2008 to 2016 by extracting randomly 2,000 units from the Indiana Commission for Higher Education’s Student Information System (ICHE-SIS) that provide accurate enrollment and financial information in Indiana for each student enrolled in public higher education. To estimate the effects of its policy on enrollment and completion of students who received the 21^st Century Scholars program, we applied difference in differences (DID) methods between students with the aid and without it and before and after 2012 when the new policy is first applied. The model we used includes variables related to student demographic backgrounds, socioeconomic status, college academic achievement, institutional characteristics, and college completion components. We expect the new policy’s significant effects of increasing not only access rate to college but also success rate in college of students who received the changed 21^st scholars’ program. In addition, we suppose that the change of program structure allows students to concentrate on their academic achievement and have risk-sharing perspective between students and state for improving college completion. This first empirical study using the policy change in the 21^st scholars’ program will provide an implication on a policy change from need-based one to merit-based one.