Research from MIT's School Effectiveness & Inequality Initiative found making college more affordable cut dropout rates and boosted degree attainment.
The study groups<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDk1OTU2OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NzYyMjgyMH0.HoOUfA4eXLgFltk-M_Mu3E3qORUh2shzeYoVa3wk86E/img.jpg?width=1245&coordinates=0%2C237%2C0%2C237&height=700" id="861dd" class="rm-shortcode" data-rm-shortcode-id="cfef9e15abee21ae82c46b76199c4436" data-rm-shortcode-name="rebelmouse-image" data-width="1245" data-height="700" />
An aerial view of MIT and Harvard Bridge. The university's School Effectiveness & Inequality Initiative partnered with the Susan Thompson Buffett Foundation for the study.
Credit: Adobe Stock<p>The study comes from <a href="https://seii.mit.edu/" target="_blank">MIT's School Effectiveness & Inequality Initiative</a>. Its researchers wanted to determine the effect scholarships had on degree attainment. As they put it, </p><p style="margin-left: 20px;">"Financial aid is typically motivated by a desire to increase postsecondary attainment by making college more affordable. This raises the question of whether aid meets this test by boosting educational attainment. As with any sort of award or subsidy, it's worth considering the extent to which financial aid changes behavior. The fact that aid is motivated by the desire to increase schooling does not mean aid programs accomplish this."</p><p>To test this question, they partnered with <a href="https://buffettscholarships.org/" target="_blank">the Susan Thompson Buffett Foundation</a>, an organization that offers scholarships to first-time freshman attending public colleges in Nebraska. The researchers designed a partially randomized study around the Foundation's 2012–2016 scholarship applicants, a cohort of roughly 16,500 students seeking aid. </p><p>Because low-scoring applicants were unlikely to complete college, they were not provided a scholarship and were removed from the study. Similarly, while high-scoring applicants were awarded a scholarship, they too were removed from the study as their degree completion was likely with or without the financial abetment. This left a middle pool of applicants, each sporting a comparable level of need and college-readiness.</p><p>The Foundation awarded scholarships randomly to this middle group of applicants; those who did not receive scholarships served as the controls. Because the number of applicants far exceeded the available aid, no student was artificially denied a scholarship for the study's sake. All told, the study included 3,699 scholarship-awarded participants and 4,491 controls. Most sought degrees at four-year colleges though some matriculated into two-year schools.</p><p>As this group was comparable in areas such as GPA, colleges attended, and expected family contributions, any statistically significant difference between the recipients and the controls would provide some evidence of a causal connection between financial aid and degree attainment.</p>
Easing the six-year itch<p>The researchers followed the students' college careers, from freshman year to spring 2019, and found that the scholarships did change behavior. Enrollment was only slightly higher for the aid recipients than the controls—98.7 percent compared to 96.1—but as the two groups' college careers continued, a noticeable difference emerged in dropout rates. By the end of their fourth year, only 71.6 percent of the control group remained, a dropout rate of 24.5 percent; meanwhile, the scholarship group only declined by 18 percent.</p><p>The scholarships also bolstered degree completion. Though bachelor degree completion was roughly even by the end of the fourth year, the aid recipients began to pull ahead after that. By the end of their sixth year, 71 percent of the award recipients received their degree, 8.4 percentage points more than the control. This suggests that as degree completion began to drag on longer, the infusion of extra financial resources made the final push more manageable.</p><p>The researchers not only found that aid promotes full-time enrollment, but that it benefitted historically underrepresented groups most, including non-white and first-generation applicants. These findings support a <a href="https://vtechworks.lib.vt.edu/handle/10919/100548" target="_blank">growing</a> <a href="https://files.eric.ed.gov/fulltext/ED545465.pdf" target="_blank" rel="noopener noreferrer">body</a> of <a href="https://kuscholarworks.ku.edu/bitstream/handle/1808/12507/Shulenburger_University.pdf;sequence=1" target="_blank" rel="noopener noreferrer">research</a> that suggests college affordability directly impacts student decision-making and degree attainment.</p><p>The study, titled "<a href="https://seii.mit.edu/wp-content/uploads/2020/10/SEII-Discussion-Paper-2020.06-Angrist-Autor-Pallais.pdf" target="_blank" rel="noopener noreferrer">Marginal Effects of Merit Aid for Low-Income Students</a>," is part of an ongoing research study. Additional reports will be released as the study continues.</p>
What does college affordability mean?<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="2f032882b6038c7d6734ac69f95fbb69"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/qZTnmMxnU0A?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>Scholarships are one way of making college more affordable, but they are part of a much larger conversation as to what affordability means.</p><p>The <a href="https://www.cnbc.com/2019/10/24/why-college-tuition-keeps-rising.html" target="_blank">ballooning cost of tuition</a> in recent decades is another concern. Factors for this surge include a massive increase in demand, cuts in state funding, new student services, and <a href="https://www.chronicle.com/article/executive-compensation-at-public-and-private-colleges/#id=table_public_2019" target="_blank" rel="noopener noreferrer">bloated administrative compensation</a>. While colleges could certainly rein in some of their more extravagant expenses, and legislators agree to fund more, <a href="https://www.luminafoundation.org/files/publications/ideas_summit/College_Affordability-What_Is_It_and_How_Can_We_Measure_It.pdf" target="_blank" rel="noopener noreferrer">the question of affordability</a> goes further still. </p><p>It concerns the quality of education, whether students are dependent or independent, their resources before matriculating, what they can expect from the investment after graduation, and how much of their future income they are willing (or able) to pay. The calculus must also consider <a href="https://bigthink.com/kenzie-academy/software-engineering-school" target="_self">available alternatives</a>, their costs, and their potential outcomes. It's a multifaceted balancing act between what's available, what students can afford, and what schools can offer with the resources they have available—which, of course, ties directly to the funds that schools have available. </p><p>In <a href="https://www.higheredtoday.org/2017/05/16/think-college-affordability/" target="_blank" rel="noopener noreferrer">an op-ed for Higher Education Today</a><em>, </em>Susan Baum, a senior fellow in the Education Policy Program at the Urban Institute, correctly points out that a "low-cost program designed purely to train people for an occupation that is unlikely to exist in 10 years, while appearing 'affordable,' is not affordable at all."</p><p>So then, how should we think about college affordability?</p><p>Baum recommends we start the conversation with need-based considerations at the forefront. "The financial resources available to a student at the time of enrollment are critical. Students have very different starting points for measuring outcomes and value depending on their circumstances," Baum writes. But it also requires us to think beyond funding; we need to consider the resources colleges need to provide a valuable education as well as the types of experiences that students want. </p><p>If we want more students to graduate, we need to discover the right balance between moderate spending, need-based aid, and program quality, a balance that will make college accessible to all who desire to attend.</p>
A new survey found that 27 percent of millennials are saving more money due to the pandemic, but most can't stay within their budgets.
Taking control of bad luck<p>According to <a href="https://themanifest.com/accounting/budgeting-money-tips-for-millennials" target="_blank">a recent survey by The Manifest</a>, a business news website, millennials agree with Cramer. The study found that, of millennials surveyed, their largest expenses were housing (66 percent), educational expenses (9 percent), and health insurance (6 percent). In light of the COVID-19 pandemic, millennials are using the remaining 19 percent of their paychecks to budget and increase their savings.</p><p>About a third of millennials said they are saving more money in response to the pandemic and creating new budgets for themselves. In fact, of all generations surveyed, millennials felt the most comfortable creating personal budgets. They were also willing to think critically and adjust budgets to match financial changes, both signs that this highly-educated generation is willing to learn and adapt.</p><p>Millennials still have a rough road ahead, though. According to the survey, about half of millennials make less than $50,000 a year. That puts them into the upper-lower or lower-middle <a href="https://www.pewresearch.org/fact-tank/2020/07/23/are-you-in-the-american-middle-class/#:~:text=In%202018%2C%20the%20national%20middle,(incomes%20in%202018%20dollars)." target="_blank">income class</a>, depending on where in the country they live. That matches <a href="https://www.bls.gov/opub/mlr/2019/article/time-use-of-millennials-and-nonmillennials.htm#:~:text=Among%20full%2Dtime%20wage%20and,with%2031%20percent%20of%20nonmillennials." target="_blank" rel="noopener noreferrer">BLS data</a>, which shows millennials earning less than older non-millennials. <a href="https://www.bls.gov/opub/mlr/2019/beyond-bls/the-kids-are-alright-millennials-and-the-economy.htm" target="_blank" rel="noopener noreferrer">The BLS also notes</a> that while millennials have less debt than GenXers, most of that is student loan debt rather than mortgages.</p><p>And despite their budgetary plans, only 11 percent of millennials surveyed were able to stay within budget, while uncertainty still looms in the future job market.<em></em></p><p>With all this said, there are caveats to The Manifest survey. It hosted a relatively small sample size, only surveying 502 Americans. Of those, millennials made up 22 percent of respondents. They weren't even the largest cohort in the study. That was the baby boomers at 32 percent. </p><p>This makes the survey more suggestive than indicative. But the suggestion is that millennials, to borrow a phrase from writer Vicki Robin, are ready to reinterpret their relationship with finances.</p>
A push for financial freedom<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="a463513bfbe5a2b7d5bcc59f8be265a7"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/J-B-b393epk?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>While budgeting and financial savvy have always been important, the millennial generation will need to be far more critical of their relationship with the economy. What <a href="https://www.youtube.com/watch?v=T_tDthUWsVM" target="_blank" rel="noopener noreferrer">Robin calls the old roadmap</a>—the idea that "growth is good, more is better, game over"—is unlikely to support millennials as it did past generations. They'll need a new roadmap, charting both a new macro (the relationship between our economic and ecological footprints, for example) and micro (our individual relationships with money).</p><p>Because the macro is a whole other article, we'll stick with the micro here:</p><p><strong>1) Track and cut your spending</strong></p><p>The first step to financial freedom is to track your spending and cut unnecessary purchases. For Robin, these are often the things, services, and subscriptions that we buy out of habit, but we no longer consider whether they add value to our lives.</p><p>A pernicious modern example is the subscription economy. We subscribe to services for food, clothes, television, exercise, self-help, video games, bric-a-brac, computer programs, and on and on. These services quickly fade into the financial background as just another bill we pay. </p><p>But if we watch Netflix nine times out of ten, why pay for Hulu and Disney+ and HBO Max and CBS All access? Instead, every month or so, we should scrutinize our subscriptions to ask whether they still add value to our lives. If they don't, unsubscribe.</p><p><strong>2) Kill your debt</strong></p><p>Debt doesn't just take away money we could save elsewhere; it's also a self-replicating devourer of wealth. Your debt interest rates are almost certainly higher than your investment returns, especially on credit cards. Because of this, no matter your saving rituals, you're likely bleeding wealth the longer you remain in debt.</p><p>Instead, focus on removing debt from your life. Again, credit card debt especially. The good news is that most companies have hardship programs to help debtors. You can call them to see if they can lower your interest rates or provide other helpful services.</p><p>"Financial accommodations are generally readily available right now," Amy Thomann, the head of consumer credit education at TransUnion, <a href="https://www.nytimes.com/2020/08/29/at-home/manage-finances-save-money-millennials-coronavirus.html" target="_blank" rel="noopener noreferrer">told the New York Times</a><u>.</u> "Lenders, just like consumers, understand the hardships that are going on in the economy."</p><p><strong>3) Have an emergency fund</strong></p><p>Of course, you'll need some savings when the unexpected happens. Say—I don't know—a worldwide pandemic? Experts like Robin and Thomann recommend people have three to six months' worth of expenses on reserve. These should be in liquid assets so you can access them easily and quickly.</p><p>Of course, that's not always feasible, but you should save what you can. </p><p><strong>4) Find social outlets that don't cost</strong></p><p>The economic shutdown has offered one financial boon: It has revealed ways we can enjoy each other's company with overspending. We can host movies remotely with our friends. Play video games online. Enjoy physical-distance strolls through the park. And a host of other creative connections. After the pandemic, the occasional bar hop or Friday dinner out can still be a guilty pleasure. But unlike sitcom characters, we shouldn't be spending our social lives on the set of our favorite coffee shops or local watering holes.</p><p><strong>5) Reconsider your relationship with money</strong></p><p>Robin pushes her readers to be financially free. That is, to understand that there's an economy, people have a relationship with it, but it shouldn't become an obsession that runs their lives. As <a href="https://www.youtube.com/watch?v=xDaBjc4QyWU" target="_blank" rel="noopener noreferrer">she told <em>Big Think</em></a>: "It's like there are so many presumptions that drive us into wage [slavery], and it doesn't matter whether you are at the low end or the high end. If you are engaged in that sort of anxious process of 'more, more, more,' you are not free."</p><p>The millennial generation has certainly been dealt a bum hand, but it's perhaps defeatist, and more than a little premature, to label them the unluckiest generation. Perhaps after being led astray by the old roadmap, they will be the generation to reconsider their relationship with money—not as an end itself but a means to a healthier and more beneficial life. </p>
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Money can't buy happiness, but try being hopeful and broke at the same time.
- A new study finds money alone doesn't make people happy—they need some hope for the future too.
- The study adds to the increasing pile of literature on the subject of how hope influences our wellbeing.
- The findings, particularly on when this effect doesn't work, may have implications for future policy decisions.