Institutional variation in enrollment of low-income students

Socioeconomic diversity in tertiary education has come under increased scrutiny over the past few years.  This paper estimates the influence of prices (both sticker-price and net price), financial aid policies, and selectivity on the matriculation decisions of low-income students, across postsecondary institutions.  All three factors are significant in determining the representation of Pell grant recipients as a percent of an institution’s entering class.

The average net price charged to low-income students, those with family income less $30,000 per year, was found to have a negative and statistically significant influence on enrollment of low-income students.  Similarly, the average net price charged to all aid recipients was also found to be negatively related to low-income enrollment.  The total cost of attendance, was found to have a negative and significant impact on enrollment of low-income students at private institutions, but not at public institutions.  Similarly, being need-blind and meeting-full need in admissions has a positive and significant effect on enrollment of Pell grant recipients, while gapping (not meeting all financial aid need) has a negative and significant impact on low-income enrollment, at private institutions.  The same financial aid policies were not found to be significant in affecting enrollment of low-income students at public universities, conditional on net price.

There is weak support for the argument that eliminating loans for low-income students increases enrollment of Pell grant recipients, conditional on net price.  Expenditures per student were found to have a consistent, positive, and significant influence on enrollment of low-income students.  Similarly, higher average SAT scores results in fewer Pell grant recipients as a percent of the entering class.  This makes it more difficult for highly selective institutions to matriculate low-income students, other things equal.

These results suggest that price, both net price and sticker-price, play an important role in determining where low-income students choose to enroll.  These results also suggest that the model of high price-high aid practiced by many private institutions may lead to discouraging more low-income students from enrolling than it does enticing them through generous financial aid packages, at least at private institutions.  Similarly, a commitment to being need-blind and meeting full need and limiting loans may help institutions with the resources to follow these policies attract more low-income students.

A focus on net price, while important, ignores the significant influence of sticker-price (shock), selectivity, and financial aid policies on low-income students’ enrollment decisions, particularly at private institutions.