Student Aid Reforms in Quebec: Is Changing the Clawback Rate Better than Changing the Base Grant?

We examine two ways through which student financial aid can be reformed: a cut in the rate at which the aid is clawed back with earned income or an increase in the threshold at which this clawback applies. We present a theoretical and empirical analysis of these options. We show that both reduce incentives to work, although the clawback rate does so less. Cuts to clawbacks also deliver a bigger boost to financial aid for those most in need, although they may benefit students higher in the income distribution. We argue that governments might consider a policy that reduces clawback rates, but within a reasonable range of earned income.

How Big is the Ballpark? Assessing Variation in Grant Aid Awards within Net Price Calculator Student Profiles

Net Price Calculators (NPCs) are online tools designed to increase transparency in college pricing by presenting students with individualized estimates of net prices to attend a given postsecondary institution. The federal template NPC predicts identical aid awards for similarly-profiled students attending the same institution. Using the 2012 National Postsecondary Student Aid Survey, we use regression analysis to assess variation in actual financial aid awards among students predicted by the federal template NPC to receive identical awards. We find estimated aid, derived from the federal template NPC, accounts for 70 percent of the variation in actual grant aid received by students. We then consider modifications to the federal template NPC that include an additional upper income bracket option and indicators of both high school grade point average and Free Application for Federal Student Aid filing time. These modifications explain an additional 16 percentage points, or more than half, of the unexplained variation in actual grant aid awards across all institutional sectors. These findings are especially relevant as legislators consider policy efforts to bring greater transparency to college cost and pricing, including creating a universal NPC in which prospective students can enter information once to receive net price estimates at any institution.

Disproportionate Burden: Estimating the Cost of FAFSA Verification for Public Colleges and Universities

Verification is a federally mandated process that requires selected students to further attest that the information reported on their Free Application for Federal Student Aid (FAFSA) is accurate and complete. In this brief, we estimate institutional costs of administrating the FAFSA verification mandate and consider variation in costs by institution type and sector. Using data from 2014, we estimate that compliance costs to institutions in that year totaled nearly US$500 million with the burden falling disproportionately on public institutions and community colleges, in particular. Specifically, we estimate that 22% of an average community college’s financial aid office operating budget is devoted to verification procedures, compared with 15% at public 4-year institutions. Our analysis is timely, given that rates of FAFSA verification have increased in recent years.

How Have FAFSA Submissions Differed During COVID-19?

We examine changes in California’s FAFSA (Free Application for Federal Student Aid) applications during the COVID-19 crisis. There was little change in applications for high school graduates due to an early deadline for state aid. After the deadline—from early March to mid-August—FAFSA applications of potential college freshmen declined 14%, relative to prior years. Although there were initial declines in applications among more experienced undergraduates and graduate students, these quickly rebounded and were 8% higher relative to prior years. FAFSA applications increased more in counties that had larger increases in unemployment insurance claims but declined more in zip codes that were lower income or were more heavily Black and Hispanic.

The Hidden Costs of Corroboration: Estimating the Effects of Financial Aid Verification on College Enrollment

Every year, the U.S. Department of Education selects hundreds of thousands of low-income students to provide additional documentation to corroborate their financial aid eligibility in a process known as verification. Although many are concerned about the potential deleterious effects of being selected, to date, studies are limited to descriptive analyses. To fill this gap in the literature, we use population-level, multicohort data to estimate the effects of financial aid verification on initial college enrollment for recent high school graduates in Tennessee. An entropy balance weighting approach indicates that students selected for verification are 3.8 percentage points (4.9%) less likely to enroll in college with underserved populations and late Free Application for Federal Student Aid (FAFSA) filers most negatively affected.