Targeting Financial Aid for Improved Retention Outcomes
With public funding for financial aid facing constraints at both the state and federal levels, there is heightened interest in the question: How do strategies allocating financial aid affect student retention and completion? Indeed, a growing body of literature addresses this issue, with most studies suggesting that increasing the size of individual financial aid packages creates relatively modest improvements in student retention. In one such study, Eric Bettinger found through a broad review of the literature that, on average, a $1,000 increase in Gift Aid for needy students results in a 2 to 4 percentage point increase in student retention. However, he concludes that, in the absence of better targeting of financial aid, “The marginal benefit might not be sufficiently large to offset the cost of a large-scale expansion in the program’s generosity. To expand the generosity, we either need to identify more cost-effective forms of financial aid or find ways to target aid programs more effectively.”
This paper investigates financial aid policies and approaches affecting public institutions in the state of Louisiana and suggests a research-based approach to leveraging declining state resources in order to enable the greatest possible number of students to complete their postsecondary education. This work was conducted with generous support from the Bill and Melinda Gates Foundation.