This paper attempts to provide information on the impact of financial aid on the human capital investment decision. Financial aid, in the form of grants/scholarships and loans, decreases the present value cost of college attendance and should have a positive effect on the decision to invest. In order to test this hypothesis, a modified investment regression was tested using yearly institutional characteristics pooled from 4-year institutions in Ohio and Pennsylvania from 2004 to 2008. This data will show the affects of tuition, different types of financial aid, income, race and gender (using the proportion of students that fall into each category) on the retention and graduation rates. While theoretically the hypothesis remains true, the results of this lack evidence that grants increase retention. In addition, loans negatively affect retention. The graduation rate results were surprising. Financial aid in general was not statically significant. Grants had a negative effect while loans positively affected graduation rates.
Gibson, Kyrstin C., "“I Can’t Afford Not to Go to College!”: An Analysis on the Effects of Financial Aid on the Human Capital Investment Decision" (2014). Senior Independent Study Theses. Paper 5935.
Behavioral Economics | Econometrics | Economic Theory
financial aid, loan, human capital investment
Bachelor of Arts
Senior Independent Study Thesis
© Copyright 2014 Kyrstin C. Gibson