Losing Aid, Losing Ground? The Academic and Career Consequences of Financial Aid Loss

• In Event: Consequences of State Policies on Higher Education Institutions

Abstract

As state and federal policymakers seek to improve college affordability, the structure of financial aid programs — particularly their renewal requirements — has become a central concern. While most research has focused on the benefits of receiving aid, less is known about the consequences of losing aid. This study examines the academic and early-career impacts of losing the need-based TEXAS Grant — a statewide program serving over 80,000 students annually — using a multidimensional difference-in-discontinuities design at the program’s second- and third-year renewal thresholds. Because students near these thresholds vary widely in academic performance, I also segment the analysis by whether students are close to the GPA requirement, the credit requirement, or both, highlighting important heterogeneity in the effects of aid loss.—

    This research makes several contributions to the literature. First, it highlights the overlooked impact of aid loss later in college, unlike prior research focused on first-year renewals (Carruthers and Özek, 2016; Cummings et al., 2022). Second, it extends analysis by examining major switching and early-career earnings alongside persistence and graduation. Third, it shows that the consequences of aid loss depend not only on which renewal criterion a student fails to meet, but also on the timing of the loss.

    The TEXAS Grant provides an average of $5,500 annually, comprising nearly one-third of recipients’ total aid. Continued receipt requires meeting both cumulative GPA (2.5) and credit completion (24) benchmarks; failure to meet either results in permanent aid loss. Leveraging linked administrative data from higher education and workforce records in Texas, this study isolates the causal impact of aid loss.
    
    Losing the TEXAS Grant meaningfully disrupts students’ academic progress and financial stability. Across both the second- and third-year renewal thresholds, students partially compensate through increased borrowing, though they still face a large drop in total aid. Loss after the second year leads to declines in full-time enrollment (7.5 pp) and credit accumulation. The most severe impacts are concentrated among those who fail only the credit completion requirement. For this group, persistence declines by 13.2 pp and degree attainment falls by 14.5 pp. In contrast, students who lose aid after the third year are less likely to graduate on time, but eventual degree completion is less affected. I also find modest evidence of major switching away from STEM fields, though short-term impacts on earnings are limited.
       
    The findings point to the importance of evidence-informed partnerships among state agencies, institutions, and researchers in building resilient financial aid systems. In the case of the TEXAS Grant, policymakers could consider replacing the credit completion requirement with a credit attempted threshold, or implementing behavioral nudges for students planning to take exactly 24 credits to enroll in an additional course, increasing their chances of maintaining eligibility. While this study focuses on a state program, the results are especially relevant amid federal aid uncertainty. They underscore how aid disruptions can have far-reaching academic consequences, highlighting the need for thoughtful policy design that motivates academic progress while continuing to support successful students throughout their education.

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Author

• Seth Walker, Michigan State University
  Presenting Author