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We examine U.S. children whose parents won the lottery to trace out the effect of financial resources on college attendance. The analysis leverages federal tax and financial aid records and substantial variation in win size and timing. While per-dollar effects are modest, the relationship is weakly concave, with a high upper bound for amounts greatly exceeding college costs. Effects are smaller among low-SES households, not sensitive to how early in adolescence the shock occurs, and not moderated by financial aid crowd-out. The results imply that households derive consumption value from college and household financial constraints alone do not inhibit attendance.
How are teacher pension benefits funded? Under traditional plans, the full cost of a career teacher’s benefits far exceeds the contributions designated for them. The gap between the two has three pieces, which may (with some license) be mnemonically tagged the three R’s of pension funding: Redistribution, Return, and Risk. First, some contributions made for the benefits of short-term teachers are Redistributed to fund the benefits of career teachers. Second, pension plans assume rosy Returns on their investments, which push costs onto future teachers and taxpayers. Finally, the Risk inherent in providing guaranteed pensions carries other costs, tangible and intangible, notably including the non-trivial risk of insolvency, which would dramatically raise mandated contributions and endanger future teacher benefits. I quantify these three components of the gap between benefits and contributions using the same metric as annual contributions. Illustrating with the California plan, I find the full cost of a career teacher’s annual accumulation of benefits can be as high as 46.6 percent of earnings, nearly triple the corresponding contributions of 17.5 percent. To understand this gap, which fiscally impacts all areas of education policy, researchers and practitioners may find it helpful to think of the three R’s of pension funding: Redistribution, Return, and Risk.
This article asks whether small changes to community college courses and programs can help improve student outcomes. We use administrative data from the California Community College system, including millions of student records and detailed course-level information for most career-technical education programs in the state. We construct a summary measure of each program’s flexibility, incorporating many components of the availability and scheduling of its courses. We show considerable variation in this flexibility measure across programs and over time. An increase in a program’s flexibility is associated with increases in enrollment and completions, but not with changes in its completion rate.
For years Georgia's HOPE Scholarship program provided full tuition scholarships to high achieving students. State budgetary shortfalls reduced its generosity in 2011. Under the new rules, only students meeting more rigorous merit-based criteria would retain the original scholarship covering full tuition, now called Zell Miller, with other students seeing aid reductions of approximately 15 percent. We exploit the fact that two of the criteria were high school GPA and SAT/ACT score, which students could not manipulate when the change took place. We compare already-enrolled students just above and below these cutoffs, making use of advances in multi-dimensional regression discontinuity, to estimate effects of partial aid loss. We show that, after the changes, aid flowed disproportionately to wealthier students, and find no evidence that the financial aid reduction affected persistence or graduation for these students. The results suggest that high-achieving students, particularly those already in college, may be less price sensitive than their peers.
One frequently cited yet understudied channel through which money matters for college students is course availability- colleges may respond to budgetary pressure by reducing course offerings. Open admissions policies, binding class size constraints, and heavy reliance on state funding may make this channel especially salient at community colleges, which enroll 47% of U.S. undergraduates in public colleges and 55% of underrepresented minority students. We use administrative course registration data from a large community college in California to test this mechanism. By exploiting discontinuities in course admissions created by waitlists, we find that students stuck on a waitlist and shut out of a course section were 25% more likely to take zero courses that term relative to a baseline of 10%. Shutouts also increased transfer rates to nearby, but potentially lower quality, two-year colleges. These results document that course availability- even through a relatively small friction- can interrupt and distort community college students’ educational trajectories.
Many states have recently made or are considering changes to their teacher retirement systems. However, little is known about how teachers value various elements of their retirement benefits versus other aspects of their jobs and compensation. To help alleviate this gap, we use a discrete choice stated preferences experiment embedded in a nationally representative survey of teachers to estimate their willingness-to-pay for various retirement plan characteristics and other non-salary job components. We find that teachers would be indifferent between a traditional pension and alternative retirement plan designs if the alternatives were paired with 2 to 3 percent salary increases. Our results indicate that experience is a significant mediator of retirement plan preferences. While more experienced teachers are willing to pay more to keep their traditional pension plans, inexperienced teachers do not have strong preferences around retirement plan type. However, teachers’ willingness-to-pay for traditional pension plans is less than their willingness-to-pay for many other elements of their compensation, including the value of retirement benefits, retirement age, salary growth, healthcare coverage, and Social Security enrollment.
Most public colleges and universities rely heavily on state financial support. As state budgets have tightened in recent decades, appropriations for higher education have declined substantially. Despite concerns expressed by policymakers and scholars that the declines in state support have reduced the return to education investment for public sector students, little evidence exists that can identify the causal effect of these funds on long-run outcomes. We present the first such analysis in the literature using new data that leverages the merger of two rich datasets: consumer credit records from the New York Fed's Consumer Credit Panel (CCP), sourced from Equifax, and administrative college enrollment and attainment data from the National Student Clearinghouse. We overcome identification concerns related to the endogeneity of state appropriation variation using an instrument that interacts the baseline share of total revenue that comes from state appropriations at each public institution with yearly variation in state-level appropriations. Our analysis is conducted separately for two-year and four-year students, and we analyze individuals into their mid-30s. For four-year students, we find that state appropriation increases lead to substantially lower student debt originations. They also react to appropriation increases by shortening their time to degree, but we find little effect on other outcomes. In the two-year sector, state appropriation increases lead to more collegiate and post-collegiate educational attainment, more educational debt consistent with the increased educational attainment, but lower likelihood of delinquency and default. State support also leads to more car and home ownership with lower adverse debt outcomes, and these students experience substantial increases in their credit score and in the affluence of the neighborhood in which they live. Examining mechanisms, we find state appropriations are passed on to students in the form of lower tuition in the four-year sector with no institutional spending response. For community colleges, we find evidence of both price and quality mechanisms, the latter captured in higher educational resources in key spending categories. These results are consistent with the different pattern of effects we document in the four-year and two-year sectors. Our results underscore the importance of state support for higher education in driving student debt outcomes and the long-run returns to postsecondary investments that students experience.
We replicate and extend prior work on Florida’s Bright Futures merit aid scholarship to consider its effect on college enrollment and degree completion. We estimate causal impacts using a regression discontinuity design to exploit SAT thresholds that strongly determine eligibility. We find no positive impacts on attendance or attainment, and instrumental variable results generally reject estimates as small as 1-2 percentage points. Across subgroups, we do find that eligibility slightly reduces six-year associate degree attainment for lower-SES students and may induce small enrollment shifts among Hispanic and White students. Our findings of these minimal-at-best impacts contrast those of prior works, attributable in part to methodological improvements and more robust data, and further underscore the importance of study replication. (JEL: H75, I21, I22, I23, I28)
The Post-9/11 GI Bill allows service members to transfer generous education benefits to a dependent. We run a large scale experiment that encourages service members to consider the transfer option among a population that includes individuals for whom the transfer benefits are clear and individuals for whom the net-benefits are significantly more ambiguous. We find no impact of a one-time email about benefits transfer among service members for whom we predict considerable ambiguity in the action, but sizeable impacts among service members for whom education benefits transfer is far less ambiguous. Our work contributes to the nascent literature investigating conditions when low-touch nudges at scale may be effective. JEL Classification: D15, D91, H52, I24
Verification is a federally mandated process that requires selected students to further attest that the information reported on their 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 $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 to 15% at public four-year institutions. Our analysis is timely, given that rates of FAFSA verification have increased in recent years.