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How You Pay Affects How You Do: Financial Aid Type and Student Performance in College

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  • Peter Cappelli
  • Shinjae Won

Abstract

Students receiving financial aid pay different amounts for equivalent education and do so in different ways: Grants, which do not have to be repaid, loans, which are paid back in the future, and work-study, pay-as-you-go. We examine the effects of need-based aid independent of study ability on student outcomes – grade point average in particular - controlling for student background and attributes they had prior to college. We also analyze grades within colleges. The results suggest that students receiving need-based grants do significantly better in college than those not receiving financial aid while those paying for college with loans perform significantly worse than students receiving other forms of aid.

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  • Peter Cappelli & Shinjae Won, 2016. "How You Pay Affects How You Do: Financial Aid Type and Student Performance in College," NBER Working Papers 22604, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22604
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    Cited by:

    1. Francesca Modena & Giulia Martina Tanzi & Enrico Rettore, 2018. "The effect of grants on university drop-out rates: evidence on the Italian case," Temi di discussione (Economic working papers) 1193, Bank of Italy, Economic Research and International Relations Area.
    2. Francesca Modena & Santiago Pereda-Fernández & Giulia Martina Tanzi, 2023. "On the Design of Grant Assignment Rules," Politica economica, Società editrice il Mulino, issue 1, pages 3-40.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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