| Rong Chen
University of Michigan
Exploring the effects of financial aid on the gap in student dropout rates by family income
FINAL REPORT:
The last decade has witnessed a shift in student funding from grants to loans and a widening gap in college educational attainment between students from the affluent and poor families. Over the last several decades much research has focused on student departure. Although there has been an increasing concern about the socioeconomic gap in student departure, this line of research is subjected to several major limitations. First, studies on student departure have given only limited consideration to the social class discrepancies. The most common approach higher education scholars often take is to control for social class differences rather than focusing on how those differences may be reduced by educational interventions or policies. Similarly, although there have been some important studies on the effects of financial aid on student dropout behavior in general, research focusing on understanding the differences in dropout risks among income groups and the role that different types of aid play in reducing these gaps is often ignored. Second, although scholars have come to view the process of persistence in and dropout from college as a longitudinal process, many were still not able to incorporate this into their analysis. The present study moves beyond the simple consideration of aid effects in general and attempts to remedy the deficiencies in the literature by examining how the sources of aid differentially affect the dropout risk of students based on family income in a longitudinal process. By using event history methods, this longitudinal study examines what types of aid are relatively more effective in lowering the dropout risk of certain income groups. A nationally representative sample from the Beginning Postsecondary Students Survey (BPS:96/01) is used. It contains year-by-year information on student dropout, financial aid, as well as other important factors such as indices measuring students' social and academic integration. In addition, the BPS:96/01 provides timely information about aid policy changes during the 1990s. Analysis confirms that there is an opportunity gap for low income students compared with upper income students. Results also suggest that controlling for other factors, all three aid types, namely Pell grant, loan, and work-study, are associated with lower risk of dropout. In addition, the interaction effect between Pell and parental income demonstrates that Pell grant is related a narrower dropout gap between students from low-income families and their upper-income peers, suggesting that Pell grant may dilute the effect of parental income on student departure. This also implies that, compared with loan and work-study aid, Pell grant may better help low-income students overcome the negative effects associated with their low-socioeconomic status during their stay in college than their higher-income counterparts. It could be explained by the fact that poor students have greater unmet needs and are therefore more likely to respond to and benefit from Pell grant than their non-poor peers. This study hopes to push the methodological and conceptual boundaries of higher education research, as well as provide policy-makers with much needed empirical evidence on how financial aid can be used to reduce the substantial socioeconomic gap in college student departure.
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