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UNITED STATES DEPARTMENT OF LABOR

The effects of need-based financial aid on employment and earnings: Experimental evidence from the Fund for Wisconsin Scholars [Four-Year College Student Sample] (Carlson et al., 2020)

Review Guidelines

Causal Evidence Guidelines

Absence of conflict of interest.

Citation

Carlson, D. E., Schmidt, A., Souders, S., & Wolfe, B. L. (2020). The effects of need-based financial aid on employment and earnings: Experimental evidence from the Fund for Wisconsin Scholars. Cambridge, MA: National Bureau of Economic Research. (No. w27125). [Four-Year College Student Sample]

Highlights

  • The study's objective was to examine the impact of the Fund for Wisconsin Scholars (FFWS) on employment and earnings. This profile focuses on the outcomes for students enrolled in four-year colleges. The authors investigated similar research questions for another contrast, the profile of which can be found here.  
  • The study was a nonexperimental design that used administrative data from a previous randomized controlled trial. The authors conducted statistical analyses to compare the outcomes of the treatment and comparison groups. 
  • The study found that receipt of the FFWS was significantly related to reduced employment and earnings.  
  • This study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to the Fund for Wisconsin Scholars, other factors are likely to have contributed.  

Intervention Examined

Fund for Wisconsin Scholars (FWS)

Features of the Intervention

Established in 2007, the Fund for Wisconsin Scholars (FFWS) aims to increase postsecondary persistence and attainment in Wisconsin through need-based financial aid. The Wisconsin Higher Educational Aid Board (HAEB) randomly assigns eligible students, from a list provided by Wisconsin organizations, to receive a grant from the FFWS. The randomly selected students must sign and return the award letter to the FFWS to receive the funding. The FFWS targets economically disadvantaged students attending public institutions of higher education in Wisconsin. A student is eligible for the grant if they a) graduated from a public high school in Wisconsin; b) are 21 years old or younger; c) pursuing a first degree at a University of Wisconsin System (UWS) four-year university, two-year college; or Technical College System colleges, and d) eligible to for a Pell Grant. Students at four-year schools can receive up to $4,000 per year. The award is renewable for up to ten semesters. 

Features of the Study

This study was a nonexperimental design that used administrative data from a previous randomized controlled trial. Students at thirteen campuses within the University of Wisconsin System participated in the original RCT study. The authors used five administrative datasets that contained annual information on all students eligible for the FFWS grant beginning with the 2009-2010 academic year. The study includes data from eight cohorts and were obtained from the HAEB, National Student Clearinghouse, Wisconsin Department of Public Instruction, University of Wisconsin System administration records, the Unemployment Insurance database maintained by the Wisconsin Department of Workforce Development, and the Client Assistance for Re-employment and Economic Support database accessed through the Multi-Sample Person File maintained by the Institute for Research on Poverty at the University of Wisconsin-Madison.  The authors used statistical analyses to compare the outcomes of the treatment and comparison groups.  

Findings

Employment

  • The study found that there was a significant negative relationship between receiving the FFWS grant and employment, with FFWS recipients having lower employment rates in the first, second, sixth, seventh, and eighth years after students were randomized. 

Earnings and wages

  • The study found that there was a significant negative relationship between receiving the FFWS grant and earnings, with FFWS grant recipients earning between $285 and $1,576 less than the students in the comparison group in the eight years post-randomization. 

Considerations for Interpreting the Findings

Although the study authors account for gender, race/ethnicity, and low-income status, they do not account for age as required by the protocol. Additionally, the baseline differences between the groups were significantly different for gender and not controlled for in the statistical analyses. Therefore, this study is not eligible for a moderate evidence rating, the highest rating available for nonexperimental designs. 

Causal Evidence Rating

The quality of the causal evidence presented in this study is low, because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to the Wisconsin Fund for Scholars; other factors are likely to have contributed.  

Reviewed by CLEAR

May 2024