Federal Reserve Bank of Philadelphia
How Does Last-Dollar Financial Aid Affect First-Year Student Outcomes?
How Does Last-Dollar Financial Aid Affect First-Year Student Outcomes? Evidence from the Bridging the Gap Study
Boosting the enrollment, academic performance, and graduation rates of college students from low- and middle-income families are central goals of higher education policy. As the price of a four-year degree rises and the purchasing power of longstanding aid programs declines, governmental and institutional actors have developed an array of strategies for eliminating financial barriers to college. Prominent among these are efforts to dramatically reduce or eliminate tuition costs, often through last-dollar programs that supplement existing sources of need-based aid. To enhance our understanding of the potential and pitfalls of this approach, this paper presents an in-depth, mixed-methods case study of a need-based tuition discounting program at a public four-year institution in New Jersey. Focusing on the first full academic year of the program’s implementation, this preliminary report complements analysis of enrollment and academic performance data with insights from student interviews. We find positive impacts on enrollment, although it is unclear whether improvements in academic performance are attributable to the program. Interviews with participants suggest the program improved affordability and reduced financial stress but illuminate challenges with the financial aid process and maintaining eligibility
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