Financial Need and Aid Volatility among Students with Zero Expected Family Contribution Robert Kelchen Assistant Professor Department of Education Leadership, Management and Policy Seton Hall University robert.kelchen@shu.edu, @rkelchen April 6, 2014 Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 1 / 22
Introduction 1 Research questions 2 Data and methods 3 Data Methods Results 4 Conclusion and future work 5 Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 2 / 22
Motivation Students from high-income families are six times more likely to complete a bachelor’s degree by age 25 than those from low-income families (Bailey & Dynarski, 2011) Number of students with financial need has exploded in recent years This has far outstripped growth in financial aid programs Need to consider how to targeted aid to the neediest students Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 3 / 22
Calculating EFCs Based on FAFSA data Dependents: Considers student and parent income and assets Independents: Considers student and spouse (if married) income and assets EFCs calculated differently based on whether an independent student has any dependents EFCs often used for aid eligibility, including Pell Grant Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 4 / 22
Zero EFC Students with zero EFC considered to have the greatest need Three ways to get zero EFC: Automatic zero EFC: Household income below $24,000 and meet 1 federal benefit criteria Simplified FAFSA–assets not considered: Household income 2 below $50,000 and meet federal benefit criteria Full FAFSA: Receive zero EFC by a result of the full formula 3 Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 5 / 22
Concerns with zero EFC Values artificially truncated at zero Calls for negative EFC (e.g. Center for Law and Social Policy, 2013; Goldrick-Rab, 2014; McSwain, 2008) Could mask a great deal of heterogeneity Inability to target the most limited resources (SEOG) to students who need them the most Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 6 / 22
Research questions I used nationally-representative data and student-level FAFSA data to explore the following questions: What are the characteristics of zero EFC students? 1 How often do zero EFC students have a zero EFC in the following 2 years? Do they continue to be Pell-eligible? How do the above two questions vary based on how the EFC was 3 assigned (automatic zero EFC, simplified FAFSA, or full FAFSA)? I also explored the feasibility of calculating negative EFCs Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 7 / 22
Trends in zero EFC receipt Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 8 / 22
Trends in zero EFC receipt Pct Pell Recipients with Zero EFC by Dependency and Year 80% 70% 60% 50% 40% 30% 20% 10% 0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Dependent Independent Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 9 / 22
Research on income volatility Jacobs (2007): Nearly 10% of working-age households saw incomes fall by more than half in a two-year period Growing volatility in household incomes over time, particularly toward the bottom of the income distribution (e.g. Dynan et al., 2007; Gottschalk & Moffitt, 2009; Wagmiller & Smith, 2012) But how does this affect students’ financial aid awards? Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 10 / 22
Research on financial aid volatility Most research has been on prior prior year (PPY) income data Allows for look at year-over-year changes Large changes in income for aid filers (ASCFA, 1997; Madzelan, 1998) But changes in Pell awards would be smaller and less frequent (Dynarski & Wiederspan, 2012; Kelchen & Jones, 2013) Heller (2006) found that 80% of FRL-eligible 11th graders got the Pell Grant two years later Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 11 / 22
Data National comparisons using NPSAS waves from 1996-2012 and 2004 BPS cohort Other analyses conducted using nine-institution dataset of FAFSA filers from NASFAA 2 community colleges, 5 public research universities, and 2 private four-year colleges Data for FAFSA filers from 2007-08 through 2011-12 152,874 students: 68% dependent, 18% independent without dependents, 13% independent with dependents Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 12 / 22
Summary statistics Zero EFC by FAFSA Type and Dependency, 9-Campus Sample 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Auto zero Simplified Full Dependent Independent, no dependents Independent, with dependents Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 13 / 22
Methods Examined trends over time in zero EFC receipt using NPSAS Examined trends in continued zero EFC/Pell receipt in BPS and institutional data Calculated negative EFCs by allowing the following FAFSA elements to remain negative: Student and parent/spouse income: Taxable/untaxed income and wages, contribution from adjusted available income Assets: Parent/student business and investment assets (full FAFSA only) Did not truncate negative asset contributions Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 14 / 22
Limitations Institutional sample is only nine colleges and has no for-profits Students only observed when they refiled the FAFSA at the same college No information on academic outcomes in my data Also missing low-income students who didn’t file the FAFSA Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 15 / 22
Trends in zero EFC rates Zero EFC Receipt by Dependency Status and Year (NPSAS) 70 60 50 40 30 20 10 0 1996 2000 2004 2008 2012 Dependent Independent, no dependents Independent, with dependents Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 16 / 22
Trends in zero EFC rates Zero EFC by Sector and Year (NPSAS) 60 50 40 30 20 10 0 1996 2000 2004 2008 2012 Public 2-year Public 4-year Private 4-year For-profit Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 17 / 22
Zero EFC and Pell renewal rates Pell Renewal Rates by Year, Zero EFC in 2003-04 (BPS) 60 50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09 None Partial Full (zero EFC) Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 18 / 22
Zero EFC renewal rates Zero EFC Renewal Rates (9-college sample) 100 90 80 70 60 Auto zero 50 Simplified FAFSA 40 Full FAFSA 30 20 10 0 Dependent Independent, no Independent, with dependents dependents Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 19 / 22
Continued zero EFC renewal rates Zero EFC Rates Two Years Later (9-college sample) 100 90 80 70 60 Auto zero 50 Simplified FAFSA 40 Full FAFSA 30 20 10 0 Dependent Independent, no Independent, with dependents dependents Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 20 / 22
Estimating negative EFCs About 80% of students with an automatic zero EFC would qualify for a negative EFC, if possible Their typical negative EFC would be around $7,000 for dependents and $2,000 for independents with dependents Nearly everyone with a zero EFC from a simplified for full FAFSA would get a negative EFC Negative EFCs larger (more negative) for full FAFSA due to more chances for negative values Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 21 / 22
Conclusion and future work Zero EFC students are a heterogeneous group May want to look at FAFSA filing status as a guide for allocating aid (more to auto zero) Consider the possibility of negative EFCs I’ll keep working on my calculations and the policy implications Robert Kelchen (Seton Hall) Zero EFC Students April 6, 2014 22 / 22
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