Higher Education

Restructuring Student Aid Could Reduce Low-Income Student Dropout Rate Gao ID: HEHS-95-48 March 23, 1995

Loans and grants do not have equivalent effects on low-income students' staying in college. Grant aid lowers the probability of low-income students' dropping out, while loans have no statistically significant impact on their dropping out. Furthermore, the timing of grant aid influences student's probability of dropping out. For example, grant aid is more effective for low-income students during the first school year than in subsequent years. Given that the dropout rate is higher in students' first two years, frontloading grants would appear to provide low-income students with the most effective means of financial support when they are most likely to benefit from it. Restructuring federal grant programs to feature frontloading could improve low-income students' dropout rates with little or no changes to each students' overall four-year allocation of grants and loans. GAO supports the creation of a pilot program to evaluate the effects and costs of frontloading.

GAO found that: (1) grants and loans do not have the same effects on reducing low-income college students' dropout rates; (2) although grant aid generally lowers low-income students' dropout rates, loans have no significant impact on these students' dropout rates; (3) the timing of grant aid greatly influences students' dropout rates; (4) grant aid to low-income students is more effective during the first school year than in subsequent years; (5) although financial aid program participants have substantially lower dropout rates than other comparable students, financial aid directors and students have mixed views on the potential efficacy of frontloading aid packages; (6) a pilot program could be valuable in evaluating the cost effects of frontloading student aid for low-income college students; and (7) Department of Education officials need to further review their legislative authority to determine whether they are authorized to conduct such a pilot project.


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