Student Persistence: Effects of Need-based Financial Aid and Merit-Based Financial Aid

Sunny LiKwadwo Owusu-Aduemiri

Florida A&M University

AIR Annual ConferenceJune 2, 2009

Overview of Presentation

• Introduction• Background• Purpose of the study• Methodology

• Data Source• Variables• Analysis

• Results• Findings and conclusions

Introduction

What Matters in Persistence ?

Today, most postsecondary institutions are under heavy pressure from federal and local governments to increase their graduation and retention rates in a way of fulfilling accountability to the public. An yet, most public institutions are experiencing high drop-out rates, leading to less persistence,What are the possible factors related to persistence ? Does Financial Aid affect student persistence ?

Introduction

• Since The Higher Education Act of 1965, most financial aid programs are need-based, which is designed for students with low family income to reduce the financial burden associated with college education. Many programs have been established to provide need-based funding for students from low socioeconomic backgrounds, and these initiatives have assisted in increasing access to higher education for needy students.

• The effects of need-based aid on college persistence have been studied extensively, in part because need-based aid has been the dominant form of financial assistance in the recent past.

Introduction cont’d

• As tuition has increased over the years, states have shifted financial aid away from need-based financial aid in responding to political pressure from the middle class (Ehrenberg, 2005). At the same time college compete for the best students they can get, merit-based aid has stand out as an effective way to recruit students with strong academic performance (Duffy & Goldberg, 1998; McPherson & Shapiro, 1998).

Introduction Cont’d

• While some policy analysts remain skeptical about the potential benefits of merit-based aid, others view it as part of an array of financial aid policies aimed at achieving the broad goals and objectives of higher education.

• The inception of Georgia’s HOPE Scholarship program in 1993 started the trend towards merit-based aid. The rational behind most state merit-based programs is to encourage and reward academic work and promote college access within a state.

Introduction cont’d

• There is an increasing concern among researchers and practitioners that resources historically assisting students from low socioeconomic backgrounds are now being used to bid for academically and financially able students (McPherson and Schapiro, 1991, Heller and Marin, 2002). Evidence of a greater reliance on merit-based versus need-based aid at four-year public and private universities was also provided in research (e.g., McPherson and Schapiro, 1994).

Literature

• Several recent studies have added empirical evidence to the merit versus need-based debate in financial aid. • Henry & Rubenste’s (2002) analysis on HOPE

Scholarship Program suggested that the merit-based financial aid provided by the HOPE Scholarship Program has improved both the quality of education for college-bound students in Georgia and the equity of educational outcomes across groups.

• Dynarski (2000) and Cornwell, Mustard, & Sridhar (2001) have found that Georgia’s HOPE Scholarship has increased student access to college in terms of college-going rates or college enrollment rates.

Literature Cont’d

• The Lumina Foundation for Education's 2004 study found that need-based aid plays a bigger role in influencing high school graduates to go to college than a number of other factors, including tuition.

• St. John & Hu (2004) reported that the Washington State Achievers Program, need-based, strongly improves participating students' odds of attending college. The authors' suggest that need-based programs are more effective at raising college-going rates than merit-based grants.

Literature Cont’d

• Several other research has been conducted on the effects of the these two types of financial aid on college choice, enrollment, and student success (e.g. Dynarski, 2002; Turner & Bound, 2002; Alon, 2005; Bettinger, 2004; Dynarski, 2003; Heller, 1997; Leslie & Brinkman, 1987; Heller & Marin, 2002; Singell,2004; Binder & Ganderton, 2002; Cornwell, 2005; Cornwell & Mustard, 2002).

• The results have been somewhat mixed and inconclusive, but the general trend seems to be that need-based financial promotes access and equity while merit-based financial aid promotes education quality.

Purpose of the Study

To identify what factors play important roles in student persistence in a State University System.

Examine the impact of the two different forms of financial aid (need-based and merit-based) on persistence

Methodology: Data Source

This study uses 11 public universities in the State University System of Florida. The data include:

New FTIC students enrolled in Fall 2006, and Who applied for financial aid.

The data were extracted from the following sources: Student Financial Aid File, Student Data Course File and Admissions File Each university submits thes files to the Florida Board of Governors on an annual or a term basis.

Metholdogy: Variables

GenderRaceAgeType of institutionFamily incomeHigh school GPASAT scoreCollege GPANeed-based amountMerit-based amount

Independent variables Dedependent variables

PersistencePersisted: Returned or graduated Not persisted: Not returned in and not graduated by the next year

Methodology: Variables

Male: UncodedGender

Female: 1

White: Uncoded

Asian: 1, 0

Black:1,0

Hispanic: 1, 0

American Indian: 1, 0

Non-Resident Alien: 1, 0

Not Reported:1, 0

Age Years Old

Race

per $1000Family Income

per $1000Merit-Based Amount

per $1000Need-Based Amount

Non Research University:1, 0

Research University: Uncoded

Type of Institution

GPACollege GPA

SAT ScoreSAT

GPAHigh School GPA

Methodology: Analysis

Logistic regression is used to examine the relationship between financial aid and student persistence.

Results: Descriptive

Descriptive Analysis

Not Persisted

Persisted All

Variable Percent/Mean

Asian 3.14% 6.50% 5.91%

Black 20.86% 20.21% 20.32%

Hispanic 18.28% 20.64% 20.23%

American Indian 0.61% 0.41% 0.44%

Non-Resident Alien 0.15% 0.24% 0.22%

White 55.34% 50.10% 51.02%

Not Reported 1.62% 1.91% 1.86%

Female 55.59% 58.73% 58.18%

Male 44.41% 41.25% 41.80%

Non Research University 16.20% 12.41% 13.07%

Research University 83.80% 87.59% 86.93%Type of Institution

Gender

Race

Results: Descriptive Cont’d

Descriptive Analysis, Cont’d

Not Persisted Persisted All

Variable Percent/Mean

Age 20.76 20.71 20.72

Family Income 42,720.14 42,698.34 42,702.17

High School GPA 3.38 3.64 3.59

SAT 1,091.91 1,126.09 1,120.09

College GPA 2.12 2.98 2.83

Need-Based Amount 2,833.66 3,346.40 3,256.33

Merit-Based Amount 3,918.76 5,010.90 4,819.05

N 1,975 9,268 11,243

Results: RegressionVariable B Sig.

Gender Female 0.179*** 0.002

Asian -0.786*** 0.000

Black -0.451*** 0.000

Hispanic -0.274*** 0.000

American Indian 0.063 0.861

Non-Resident Alien -0.681 0.314

Not Reported -0.139 0.513

Age Years Old -0.092* 0.018

Family Income per $1000 0.001 0.389

High School GPA 0.003*** 0.000

SAT 0.000 0.682

College GPA 0.929*** 0.000

University Type 0.231*** 0.004

Need-Based Amount Per $1000 0.066*** 0.000

Merit-Based Amount Per $1000 0.039*** 0.000

Constant 1.305 0.271

N 11,243

*p <= .05 ** p<= .01 *** p <= .001

Race

Regression Results show that …

Student characteristics such as gender, race, and age have significant impact on persistence.

Compared to male students, females are more likely to persist.

Minorities such as Black, Hispanic and Asian students are less likely to persist compared to white counterparts.

Younger students are more likely to persist than older students.

Regression Results …

In terms of class level, only second year students have significant advantage to persistence than freshmen while third and fourth year students are not significantly different than freshmen.

Family income has significantly positive effects on persistence. The significance, however, fades away when the Amount of Unmet Needs variable is introduced to the picture. This makes economics sense in that students cannot come back and stay in college if they have significant financial barriers for them to go on no matter what family income they may have.

Student aptitude and academic preparation such as high school GPA and college GPA also have significant effects on persistence. SAT, however, does not show significant effects.

Compared to the students in Research Universities, the Non-Research Universitycounterparts tend to have higher rate of persistence.

Non-research universities tend to put more emphasis on teaching and enhancing students experience, which in turn promotes social and academic integration of the students into college life that is vital to college persistence according to Tinto’s (1975, 1987) model.

Regression Results …

• Student characteristics such as gender, race, and age have significant impact on student persistent. Compared to male student, females are more likely to persist. Minorities such as Black, Hispanic and Asian students are less likely to persist compared to white counterparts. Younger students are more likely to persist than older students.

Findings and Conclusions

• Student academic preparation (high school GPA) has positive effects on persistence. The higher high school GPA, the more likely students persist in college. Student Aptitude scores (SAT) SAT, however, does not show significant effects. Student academic performance (college GPA) also shows significant effects on persistence. The better students’ academic performance in college, the more likely they persist to the second year.

Findings and Conclusions, Cont’d

• Compared to the students in Research Universities, the Non-Research University counterparts tend to have higher rate of persistence. Non-research universities tend to put more emphasis on teaching and enhancing students experience, which in turn promotes social and academic integration of the students into college life that is vital to college persistence according to Tinto’s (1975, 1987) model.

Findings and Conclusions, Cont’d

• Both need-based and merit-based financial aids are found positive effects on student persistence. That is, the larger amount of need-based or merit-based financial aids, the more likely students persistent to the second year. Furthermore, the coefficient of need-based financial aid (.066) is almost twice as the merit-based (.039) suggesting the effects of need-based financial aids on student persistence are almost twice as the merit-based financial aids. This finding has practical implication as to how states or university administrators better appropriate their financial aids to promote student success in college.

Findings and Conclusions, Cont’d

Thank you . . .

Questions, Comments or Suggestions

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