To Apply or Not to Apply: FAFSA Completion and Financial Aid Gaps
- 2.2k Downloads
In the United States, college students must complete the Free Application for Student Federal Aid (FAFSA) to access federal aid. However, many eligible students do not apply and consequently forgo significant amounts of financial aid. If students have perfect information about aid eligibility, we would expect that all eligible students complete FAFSA and no aid would go unclaimed. Using data from the National Postsecondary Student Aid Survey, I estimate a multinomial logit model which controls for all variables that contribute to aid eligibility and other student characteristics that may deter FAFSA completion. I find that students who are lower middle income, white, male and independent from parents are less likely to complete FAFSA even when they are eligible for aid. Using propensity score matching, I find that each year applicants forgo $9,741.05 in total aid (including grant and loan aid) which includes $1,281.00 of Pell Grants, $2,439.50 of the balance subsidized student loans, $1,986.65 of the balance of unsubsidized student loans, and $1,016.04 of institutional grants. These aid totals aggregate to $24 billion annually.
KeywordsStudent financial aid FAFSA completion Economics of higher education Propensity score matching
I thank David Mustard, Christopher Cornwell, Ian Schmutte, Jonathan Williams, and Michael Walker for helpful comments and advice. This research benefited from a Summer Dissertation Fellowship sponsored by the Graduate School of the University of Georgia. I also appreciate the comments of seminar and conference participants at the University of Georgia, City University of New York, the Association of Education Finance and Policy, the Southern Economic Association, and the Midwestern Economic Association.
- Alon, S. (2011). Who benefits most from financial aid? The heterogeneous effect of need-based grants on Students’ College Persistence. Social Science Quarterly, 40(6), 1494–1505.Google Scholar
- Bryson, A., Dorsett, R., & Purdon, S. (2002). The use of propensity score matching in the evaluation of active labour market policies. Department for Work and Pensions Working Paper No. 4.Google Scholar
- Carruthers, C. K., & Welch, J. G. (2015). Not whether, but where? Pell grants and college choices. University of Tennessee Department of Economics Working Paper, No. 2015-4.Google Scholar
- Department of Education. (2015). The EFC formula. http://ifap.ed.gov/efcformulaguide/attachments/090214EFCFormulaGuide1516.pdf.
- Field, E. (2009). Educational debt burden and career choice: Evidence from a financial aid experiment at NYU law school. American Economic Journal: Applied Economics, 1(1), 1–21.Google Scholar
- Fitzpatrick, M. D., & Jones, D. (2012). Higher education, merit-based scholarships, and post-baccalaureate migration. NBER Working Paper, No. 18530.Google Scholar
- King, J. E. (2004). Missed opportunities: Students who do not apply for financial aid. Washington, DC: American Council on Education Issue Brief.Google Scholar
- McPherson, M. S., & Schapiro, M. O. (1991). Does Student aid affect college enrollment? New evidence on a persistent controversy. The American Economic Review, 81(1), 309–318.Google Scholar
- Miller, B. (2015). The right FAFSA form. Inside higher education. https://www.insidehighered.com/views/2015/02/24/essay-calls-different-approach-fafsa-reform.
- Novak, H., & McKinney, L. (2011). The consequences of leaving money on the table: Examining persistence among students who do not file a FAFSA. Journal of Student Financial Aid, 41(3), 5–23.Google Scholar
- Roy, A. D. (1951). Some thoughts on the distribution of earnings. Oxford Economic Papers, 3(2), 135–146.Google Scholar
- Scott-Clayton, J. (2012). Information barriers and financial aid policy. National Bureau of Economic Research Working Paper, No. 17811.Google Scholar