Marginal effects of merit aid for low-income students

Date Completed

Financial aid from the Susan Thompson Buffett Foundation (STBF) provides exceptionally generous support to a college population similar to that served by a host of state aid programs. In conjunction with STBF, we randomly assigned aid awards to thousands of Nebraska high school graduates from low-income, minority, and first-generation college households. Randomly assigned STBF awards boost bachelor's (BA) degree completion for students targeting four-year schools by about 8 points. Degree gains are concentrated among four-year applicants who would otherwise have been unlikely to pursue a four-year program. Degree effects are mediated by award-induced increases in credits earned towards a BA in the first year of college. The extent of initial four-year college engagement explains heterogeneous effects by target campus and across covariate subgroups. Most program spending is a transfer, reducing student debt without affecting degree attainment. Award-induced marginal spending is modest. The projected lifetime earnings impact of awards exceeds marginal educational spending for all of the subgroups examined in the study. Projected earnings gains exceed funder costs for low-income, non-white, urban, and first-generation students, and for students with relatively weak academic preparation.


American governments and private organizations spent $187 billion on financial aid to U.S. undergraduates in 2018. Government grant aid amounted to about $3,700 per full-time undergraduate, while private and institutional grants came to almost $6,000 per student.1 It is unclear whether this vast expenditure increases college enrollment and completion. Evidence on aid effects is scarce for at least two reasons. First, aid decisions are confounded with student characteristics like family background and ability. Second, naturally-occurring variation in aid rules typically changes aid packages by only a few hundred dollars. It’s hard to say whether the response to such modest changes predict those of withdrawing or adding major aid programs.

This paper assesses the effects of grant aid on degree completion in the context of a randomized field experiment that allocated exceptionally generous scholarships to 3,700 high school seniors graduating between 2012 and 2016. This experiment was conducted in partnership with the Susan Thompson Buffett Foundation (STBF), which funds about eleven percent of Nebraska high school seniors who go on to attend a Nebraska public college.

Joshua Angrist, David Autor, Amanda Pallais
Lab Name
School Effectiveness and Inequality Initiative