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ERIC Number: ED574791
Record Type: Non-Journal
Publication Date: 2016-Dec
Pages: 38
Abstractor: As Provided
Reference Count: 39
ISBN: N/A
ISSN: N/A
Performance Standards in Need-Based Student Aid. A CAPSEE Working Paper
Scott-Clayton, Judith; Schudde, Lauren
Center for Analysis of Postsecondary Education and Employment
College attendance is a risky investment. But students may not recognize when they are at risk for failure, and financial aid introduces the possibility for moral hazard. Academic performance standards can serve three roles in this context: signaling expectations for success, providing incentives for increased student effort, and limiting financial losses. Such standards have existed in federal need-based aid programs for nearly 40 years in the form of Satisfactory Academic Progress (SAP) requirements, yet have received virtually no academic attention. In this paper, we sketch a simple model to illustrate not only student responses to standards but also the tradeoffs faced by a social planner weighing whether to set performance standards in the context of need-based aid. We then use regression discontinuity and difference-in-difference designs to examine the consequences of SAP failure. In line with theoretical predictions, we find heterogeneous effects in the short term, with negative impacts on persistence but positive effects on grades for students who remain enrolled. After three years, the negative effects appear to dominate. Effects on credits attempted are 2-3 times as large as effects on credits earned, suggesting that standards increase the efficiency of aid expenditures. But it also appears to exacerbate inequality in higher education by pushing out low-performing low-income students faster than their equally low-performing, but higher-income peers. A table on DID Estimated Effects of Failing GPA Performance Standard At End of Year 1, No Covariates is appended.
Center for Analysis of Postsecondary Education and Employment. Teachers College, Columbia University, 525 West 120th Street Box 174, New York, NY 10027. Tel: 212.678.3091; e-mail: capsee@columbia.edu; Web site: http://capseecenter.org
Publication Type: Reports - Research
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: Institute of Education Sciences (ED)
Authoring Institution: Center for Analysis of Postsecondary Education and Employment (CAPSEE)
IES Funded: Yes
Grant or Contract Numbers: R305C110011