Outcomes of Need-based Financial Aid: Choice of Major & After-graduation Earnings

August, 2019

Prior research into need-based financial aid has generally focused on its impact on graduation. This paper attempts to control for potential selection bias stemming from differing financial aid award policies among schools and student choice. This paper further explores the potential relationship between need-based aid and outcome variables apart from and beyond graduation, such as choice of major and after-graduation earnings. The main findings of this research are that:

  • The impact of the four financial aid variables (grants, subsidized loans, unsubsidized loans, and work study) are inconsistent across outcomes variables. While grants are positively related to student success, work study and subsidized loans are significantly related to some outcome measures but not others. No substantive relationship is found between unsubsidized loans and any of the included outcomes.
  • With respect to graduation, the effect of financial aid allocations are generally unrelated to the school at which they are awarded. However, there is a direct relationship between the effect of financial aid allocations and the school at which they are awarded when it comes to students’ choice of major.
  • Work study seemed to have a positive relationship with student persistence to graduation, but a negative relationship to their pursuit of both STEM and in demand degrees.