Pell Grants "Natural Experiment" Found to Increases Low-Income Students’ College-Going Rates

December 18, 2008

According to the study, between academic years 1995-96 and 2003-04, the maximum Pell Grant award jumped nearly 44 percent in inflation-adjusted value, while the tuition and fee charges at public two-year colleges grew 19 percent. The faster growth in Pell Grant funding means that the price students actually paid--the "net price" after subtracting grants--actually fell during the study period. For low-income youth (those from families with income less than $30,000), the net price of attending public two-year and non-doctoral-granting four-year institutions fell by $950-$1,000, while moderate-income adolescents (those from families with income between $30,000 and $50,000) saw their net price of college decline by $550-$600. While other grant programs did contribute to the declines in net price, Pell Grants were the biggest contributor because they account for more than two-thirds of grant assistance received by low-income students at public two-year and four-year non-doctoral institutions. Because the price and grant trends were affecting students all across the United States, they created the conditions needed to study a "natural experiment."

During the natural experiment time period, the high school graduation and college-going rates of low- and moderate-income (annual family incomes between $30,000 and $50,000) youth increased. A number of factors may have accounted for these increases, such as: changes in the unemployment rate and other economic conditions; changes in the characteristics and abilities of the high school graduates; and changes in the high school graduates’ families. Using data from the "Current Population Survey," the National Center for Education Statistics, and other sources, the study authors were able to estimate that these other factors contributed very little to the increase in college-going behavior. After adjusting for other possible contributing factors, Pell Grant increases still appear to account for the increase in the percentage of low-income high school graduates entering college immediately after high school--by up to 7 percentage points. Moderate-income high schools graduates increased their college-attendance rate by about 4 points.

The study thus concludes that, holding all other factors constant, a decrease in the net price of college attendance by up to $1,000 would increase college going of low-income high school graduates by 6-7 percentage points. The larger gains in postsecondary enrollment among these low-income youth may also have been due to their greater sensitivity to changes in college prices and to some other unexplained factors that were not considered.

NACUBO Staff Resource is Ken Redd