Grant Aid Effects on Earnings & Employment: Evidence from Virginia’s Tuition-Free College Program

• In Event: Aligning Dollars with Demand: Effects of Workforce-Aligned Financial Aid on Postsecondary and Labor Market Outcomes

Abstract

Virginia’s G3 initiative was a bipartisan legislative effort to invest in and align community college workforce education to a rapidly changing economy. The tuition-free college program was ultimately leveraged as a pandemic recovery strategy and implemented in fall 2021 with the expressed intent of (1) increasing college enrollment, (2) improving workforce program persistence and completion rates, and (3) increasing labor market returns, particularly for historically marginalized adults (i.e., racial/ethnic minorities, low-income, older adults). We examine this 45-million-dollar statewide initiative and assess whether it succeeded in bolstering the alignment of degrees obtained with labor market growth and improved labor market outcomes.

G3 is a needs-based, last-dollar scholarship program for community college students in approved workforce programs in health care, information technology, manufacturing and skilled trades, early childhood education, and public safety. The theory of action of G3 reforms suggests that the tuition-free college policy will better align student enrollment in programs with entry into state-identified sectors with high projected employment growth through financial grant aid incentives. Increases in grant aid may also improve students’ likelihood of completing a degree and, subsequently, their employment and earnings.

We use administrative data from the Virginia Community College System (VCCS) and the Virginia Economic Commission (VEC), which includes roughly 180,000 students across seven entry cohorts from 2016 through 2022.  to identify causal effects of G3 on students’ academic and labor market outcomes. Our analysis centers more specifically on three research questions: (1) do students in G3 programs pursue careers in fields more aligned to their program of study than non-G3 students? (2) do students who earn credentials in G3 programs have higher earnings and employment rates than other degree completers? (3) did G3 impact student employment while enrolled and subsequent employment and earnings outcomes post college enrollment? 

We use an individual fixed effects approach that compares measures of program alignment, quarterly earnings, and employment over time to answer research questions one and two. Results from this fixed effects approach suggest students who earned credentials in G3 programs were 12 percentage points more likely to work in an industry aligned with their degree and earned 15 percent more than students who completed a credential in a non-G3 field. We next use a regression discontinuity design to compare earnings and employment outcomes for students just above and below the income-eligibility cutoff for G3 financial aid. Our results suggest that the financial aid component had negligible effects on earnings and participation in the labor market while students were enrolled, though students who were eligible for aid did experience higher quarterly earnings 2 years after initial community college enrollment than aid ineligible students. This paper offers novel estimates on the efficacy of workforce-targeted grant aid on community college student labor market outcomes and holds important implications for policymakers in other states who are considering implementing tuition-free college policies with a similar emphasis on workforce program areas. 

Authors

• Daniel Sparks, University of Arkansas
  Presenting Author

• Sade Bonilla, University of Pennsylvania
  Non-Presenting Co-Author