Simulating the Longitudinal Effects of Changes in Financial Aid on Student Departure from College

We use the estimates from a hazard model of college student departure to simulate how changes in financial-aid packaging affect students' departure decisions over time. We find that changing loans to scholarships, as Princeton has recently done, has a large impact on retention and that frontloading aid has a more modest impact. Our results also suggest that financial aid represents more to the student than just the dollar value of the aid offered. Increased knowledge about the temporal effects of different types of financial aid will help policy makers make more informed choices about the structure of financial aid packages.