Cost is a crucial factor in students’ college choices. Yet, as The Chronicle of Higher Education recently highlighted, there is still no easy, reliable way for families to quickly gauge how much they would actually need to pay at a particular college. This uncertainty, combined with steep sticker prices, can deter low-income students from applying to elite institutions where they might actually qualify for reduced or free tuition.
A working paper circulated this March by the National Bureau of Economic Research explores one potential solution, according to The Hechinger Report. Sharing the results of an experiment at the University of Michigan, the research suggests that low-income students are more likely to apply to and enroll in college when institutions guarantee to waive their tuition up-front, rather than making the free tuition offer contingent on demonstrating proof of need via financial aid forms. The findings could have implications for the growing number of elite institutions touting free tuition for low-income students.
Murkiness matters
Writing in The Chronicle, Wellesley economic professor Phillip Levine highlights how rare it is for college applicants to have financial certainty early in their application process. Levine, author of A Problem of Fit: How the Complexity of College Pricing Hurts Students—and Universities, was serving on the White House Council of Economic Advisers with a focus on higher education at the time of his son’s college search.
Recounting that it was impossible for him to figure out whether his son would be eligible for financial aid, Levine writes that “it occurred to me that if I could not figure this out, as an economist who had worked on higher-ed policy, then surely many other parents could not figure it out either.” And for low-income families, that “murkiness would pose a far more significant impediment in their college search process.”
The power of an upfront guarantee
Hoping to shrink that kind of impediment, the University of Michigan conducted an experiment involving 1,800 high school seniors with an A average and high SAT scores from homes with an annual income under $48,000 for a family of four. Two-thirds of the students received one of two invitations to apply: Half were told that, if they gained admission to the university, they would be guaranteed free tuition. The other half were told they would qualify for free tuition if their financial aid forms showed their family made less than $65,000 and had less than $50,000 in assets. The remaining 600 students served as a control group.
Sixty-three percent of students who received the tuition-free guarantee applied, 200 were admitted, and 150—about one-quarter of students who received the letter—enrolled. Just 18 percent of students who received the other letter enrolled, and the control group posted a similar rate.
Moreover, almost every recipient of the upfront guarantee letter still filed the Free Application for Federal Student Aid and tended to do so earlier than their peers, perhaps curious about the potential for extra aid to cover non-tuition expenses.
Researchers say the experiment showed the allure of “certainty” in the complex financial aid process. The Hechinger Report notes that, absent that certainty, many high-achieving high school students “don’t bother to apply to top colleges despite the likelihood of admission and a free ride.”