Transcript Losing HOPE

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LOSING HOPE
Financial Aid and the Line
Between College and Work
February 2013
Celeste K. Carruthers and Umut Ozek
University of Tennessee and AIR/CALDER
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Essential Questions
• Financial aid has been shown to increase college
enrollment, persistence, and graduation1
• Caveat: results are not universal2
• Why is financial aid important for students?
• Why do students work so hard to avoid losing aid? 3
• Non-pecuniary loss aversion?
• Financial need?
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Dynarski 2000,2003; Deming & Dynarski 2009; Scott-Clayton 2011; Castleman & Long 2012
1983; Cohodes & Goodman 2012; Sjoquist & Winters 2012
3 Cornwell et al. 2005; Scott-Clayton 2011
2 Hansen
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Contributions
• To date, we know that students who lose Georgia's HOPE
accumulate fewer credits and receive fewer degrees
(Henry et al. 2004) and tend to be concentrated in more
technical majors (Dee & Jackson 1999).
• We provide the first causal evidence of students'
college/work substitution patterns in the wake of losing
financial aid.
• Preview: less college, more work
• Beyond the scope of this paper: normative statements on
optimal scholarship retention policies.
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The Tennessee HOPE scholarship
• Financed by the state lottery
• First available to fall 2004 freshman (and some
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sophomores)
Up to $4,000/year grant for four-year students, $2,000 for
two-year students
Low eligibility threshold and (comparatively) high renewal
threshold.
Renewed with continuous enrollment, GPA of 2.75 after
24 hours, 3.0 after 48, 72, and 96 hours.
About 1/2 of HOPE scholars lose their scholarship
midway through college.
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Data
• Administrative records for 2003-2006 entering cohorts in
Tennessee two-year and four-year institutions, followed
through fall 2008.
• Scholarship status, credits attempted per term, major(s), college
GPA, demographics, distance from permanent address.
• Merged with FAFSA and ACT records for income and ACT
controls.
• Merged with quarterly earnings data for every quarter
(enrolled or not), 2003-2008.
• Merged with full-time undergraduate tuition and fees
(IPEDS).
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Descriptive Statistics
Credit load (attempted credits this term)
Different major from last term
Any earnings while enrolled (half-year)
Earnings while enrolled (half-year,
thousands, 2005$)
Exiting college: working but not enrolled
next term
Undeclared major
Student-years
Students
All
13.2
(3.4)
0.15
0.73
4-year
students
14.2
(2.7)
0.17
0.70
2-year
students
11.4
(3.9)
0.12
0.78
2.6
(3.2)
2.2
(2.9)
3.4
(3.4)
0.12
0.23
584,925
116,440
0.06
0.30
369,044
73,816
0.22
0.13
215,881
67,823
Standard deviations in parentheses below continuous variable means
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Descriptive Statistics
All
4-year students
Lost HOPE
0.19
0.21
Scholarship value (in thousands)
1.39
1.95
(1.82)
(1.98)
Cumulative GPA
2.20
2.38
(1.32)
(1.26)
Missing GPA
0.05
0.05
Tuition and fees (000s)
4.04
4.98
(1.33)
(0.60)
Male
0.44
0.45
Black
0.16
0.17
White
0.78
0.77
Family income $<$ 60,000
0.47
0.44
Missing family income
0.08
0.05
Student-years
584,925
369,044
Students
116,440
73,816
Standard deviations in parentheses below continuous variable means
2-year students
0.14
0.43
(0.88)
1.90
(1.36)
0.06
2.42
(0.20)
0.43
0.15
0.80
0.52
0.14
215,881
67,823
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Empirical Strategy
𝑌𝑖𝑡
= α0 + 𝛿1(𝑙𝑜𝑠𝑡ℎ𝑜𝑝𝑒𝑖𝑡 ) + η1 𝑡 − 𝑡0 1 𝑏𝑒𝑓𝑜𝑟𝑒𝑖𝑡
+ η2 𝑡 − 𝑡0 1 𝑎𝑓𝑡𝑒𝑟𝑖𝑡 + β𝑡 𝐺𝑃𝐴𝑖𝑡 + α𝑖 + α𝑡 + 𝑍𝑖𝑡 𝛾 + ε𝑖𝑡
• 1(losthopeit) – equal to one in semesters after HOPE loss.
• η1(t-t0)*1(beforeit) + η2(t-t0)*1(afterit) - local linear function
of time until/since HOPE loss
• βt*GPAit - college GPA, effect allowed to vary by t
• αi, αt - individual and semester sequence FE
• Zitγ - time-varying student and institution controls, linear
time trend.
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Empirical Strategy
𝑌𝑖𝑡
= α0 + 𝛿𝐻𝑖𝑡 + η1 𝑡 − 𝑡0 1 𝑏𝑒𝑓𝑜𝑟𝑒𝑖𝑡 + η2 𝑡 − 𝑡0 1 𝑎𝑓𝑡𝑒𝑟𝑖𝑡
+ β𝑡 𝐺𝑃𝐴𝑖𝑡 + α𝑖 + α𝑡 + 𝑍𝑖𝑡 𝛾 + ε𝑖𝑡
• Hit - value of HOPE scholarship in 2005$.
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Identifying Variation in HOPE
• 2004-2006 cohorts
• Deviations from mean HOPE status or value, across and within
students.
• Within-student, across αt.
• Within-semester sequence, across αi
• Within-student variation is from the failure to renew HOPE.
• 2003 cohort
• Deviations from mean HOPE status or value, across and within
students.
• This cohort was eligible to gain HOPE in 2004, then held to
renewal standards thereafter.
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Internal Validity Challenges
• Students who lose HOPE are of lower ability.
• αi controls for this class of heterogeneity.
• Students about to lose HOPE are on Yit trajectories that
confound treatment with other factors.
• η1(t-t0)*1(beforeit) + η2(t-t0)*1(afterit) controls for pre-loss and post-
loss trends common to students who lose the scholarship.
• Typically, GPA starts low and climbs just before HOPE
loss.
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College GPA before and after HOPE loss
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Credits attempted before and after HOPE
loss (regression-adjusted)
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Exit rates before and after HOPE loss
(regression-adjusted)
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Results – 2004-2006 cohorts
(1)
Outcome
Lost HOPE
(0,1)
(2)
(3)
Credits this term
-0.996***
(0.025)
HOPE value
(000s)
(4)
Changed major (0,1)
-0.006**
(0.003)
0.684***
(0.007)
0.012***
(0.001)
Four-year
public (0,1)
1.573***
(0.117)
0.408***
(0.107)
0.109***
(0.010)
0.088***
(0.010)
Terms until loss
(negative)
0.149***
(0.012)
0.390***
(0.012)
0.007***
(0.001)
0.014***
(0.001)
Terms since
loss
0.067***
(0.009)
0.167***
(0.009)
-0.001
(0.001)
0.002*
(0.001)
Tuition and fees 0.734***
(000s)
(0.045)
0.772***
(0.040)
-0.010**
(0.004)
-0.009**
(0.004)
Adjusted R2
0.18
0.11
0.11
0.13
Nit = 421,615 student-years. Cluster-robust standard errors in parentheses
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The impact of HOPE loss versus an equivalent
tuition increase on attempted credits
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Results – 2004-2006 cohorts
(1)
Outcome
Lost HOPE
(0,1)
(2)
(3)
Any earnings this term (0,1)
-0.006*
(0.003)
HOPE value
(000s)
(4)
Earnings (000s)
0.170***
(0.019)
0.001*
(0.001)
-0.027***
(0.004)
Terms until loss
(negative)
0.005***
(0.002)
0.005***
(0.001)
0.022**
(0.009)
0.042***
(0.008)
Terms since
loss
0.002
(0.001)
0.002
(0.001)
0.112
(0.073)
0.032**
(0.012)
Adjusted R2
0.02
0.02
0.09
0.09
Nit = 421,615 student-years. Cluster-robust standard errors in parentheses
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Results – 2004-2006 cohorts
(1)
Outcome
Lost HOPE
(0,1)
Undeclared
major (0,1)
0.054***
(0.003)
(2)
(3)
Work but no college next term,
and no degree (0,1)
0.070***
(0.002)
HOPE value
(000s)
-0.017***
(4.5E-05)
Terms until
loss (negative)
-0.021***
(0.002)
-0.034***
(0.001)
-0.029***
(0.001
Terms since
loss
-0.002*
(0.001)
-0.002***
(0.001)
0.001
(0.001)
Adjusted R2
0.15
0.16
0.16
Nit = 421,615 student-years. Cluster-robust standard errors in
parentheses
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Results – 2003 cohort
(1)
(2)
(3)
(4)
Outcome
Credits this
term
Changed major
(0,1)
Earnings (000s)
Leaving college
(0,1)
HOPE value
(000s)
0.334***
(0.012)
0.013***
(0.001)
-0.046***
(0.008)
-0.013***
(0.001)
Terms until loss
(negative)
-0.040***
(0.012)
0.009***
(0.001)
0.014
(0.010)
-0.017***
(0.001)
Terms since
loss
0.123***
(0.018)
-0.003*
(0.002)
0.014
(0.018)
-0.003***
(0.001)
Adjusted R2
0.11
0.11
0.12
0.12
Nit = 163,310 student-years. Cluster-robust standard errors in parentheses
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Inference
• For students who stay in college after HOPE, the first term
without HOPE is associated with
• 0.996 fewer credits (7.6% of the mean)
• $170 additional earnings (6.4% of the mean)
• 5.4 ppt higher likelihood of not declaring a major (23.2% of the
mean)
• Little to no impact on labor force participation.
• Extensive margin impacts appear much stronger than
intensive margin impacts.
• In the first term without HOPE, there is a 7.0 ppt higher likelihood of
exiting college for the workforce without a degree (58.8% of the
mean exit rate)
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Heterogeneous Impacts of Losing HOPE:
2004-2006 cohorts
(1)
(2)
(3)
Outcome
Credits this term
Earnings (000s)
Leaving college
(0,1)
All students
-0.996***
(0.025)
0.170***
(0.019)
0.070***
(0.002)
Family income <
60,000
-1.092***
(0.038)
0.150***
(0.027)
0.090***
(0.004)
Family income at
least 60,000
-0.949***
(0.036)
0.199***
(0.028)
0.054***
(0.003)
Started in a fouryear college
-0.667***
(0.028)
0.184***
(0.025)
0.050***
(0.003)
Started in a twoyear college
-1.561***
(0.056)
0.116***
(0.033)
0.114***
(0.005)
Nit = 421,615 student-years. Cells report “lost HOPE” coefficient estimates for different
subgroups. Cluster-robust standard errors in parentheses
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Conclusions
• Loss of financial aid decreases engagement with college
and shifts the college/work margin towards work.
• Attempted hours decrease.
• The likelihood of declaring a major decreases.
• Earnings increase.
• The propensity to leave college increases.
• Findings are pronounced for the lower-income half of
students, and for students who start in two-year colleges.
• Implications: money matters, especially at the extensive
margin of college enrollment.