"Financial Incentives for Low-Income College Students: Effects on College Choice and Early-Career Decisions"

Sullivan, Zachary, Economics - Graduate School of Arts and Sciences, University of Virginia
Friedberg, Leora, AS-Economics, University of Virginia
Turner, Sarah, CU-Leadshp, Fndns & Pol Studies, University of Virginia
Johnson, William, AS-Economics, University of Virginia

The first chapter of my dissertation investigates how student loans affect early-career decisions for low-income students. The University of Virginia’s (UVa) financial aid policy included an income threshold to determine whether students received approximately $5,500/year as a grant or a loan. I use the income threshold to employ a regression discontinuity (RD) approach. Moreover, a policy change replaced approximately $3,000/year of grant aid with loans for low-income students. I use the policy change to employ a difference-indifferences (DD) approach. I find that student loans did not impact enrollment at UVa or subsequent academic performance, such as GPA and degree completion. However, higher student loan levels increased the share of students who majored in business or economics by 6 percentage points and increased the share of students who accepted a job in a high-paying industry by 9 percentage points. There is suggestive evidence that student loans decreased the likelihood of students immediately attending graduate school after college. My findings show that debt leads students to alter their career path before reaching the labor market.
The second chapter examines whether colleges respond to a financial incentive that could incentivize colleges to enroll more low-income students. I use variation in funding created by an accountability system in one state, which awards public colleges substantially higher funding for the outcomes of students who are below an income threshold. For example, public four-year colleges receive approximately $3,600 in additional state funding when such a student graduates. Using state-wide administrative data on high school graduates, I compare the enrollment of students around the income threshold. Overall, the regression discontinuity estimates show no difference in college attendance or choice of four-year versus two-year college. However, analysis by college selectivity shows that the public flagship responded to equity measure by enrolling more Pell-eligible students. There is suggestive evidence that the response by the flagship diverted ineligible students to less selective public four-year colleges. Using ACT scores to measure baseline academic ability, I find that these effects are largest among students who are likely on the margin of being accepted at the flagship.
The third chapter examines the effects of conditional cash transfers on college enrollment. Together with Professor Ben Castleman, I designed and implemented a large-scale field experiment that encouraged a national sample of low-income, high-achieving students to apply to high-quality schools in their state. Students were randomized to receive: 1) a customized list of high-quality colleges in their state; or 2) the list of schools and an offer of $100 for applying to schools from their list. We find that the incentive offer increased the likelihood that students enrolled at a high-quality institution by 2.6 percentage points (4.5 percent) and reduced the share of students attending a lower-quality college. Impacts of the incentive were more than double in magnitude for low-income students. These results suggest that leveraging conditional cash transfers at high leverage decisions points—such as when students are choosing which colleges to apply to—could be an efficient use of resources to reduce socioeconomic disparities in the quality of higher education institution students attend.

PHD (Doctor of Philosophy)
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