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Reducing Student Loan Indebtedness: Examining the Excelsior Scholarship's Role in Loan Borrowing among Middle-Income Students

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Title: Reducing Student Loan Indebtedness: Examining the Excelsior Scholarship's Role in Loan Borrowing among Middle-Income Students
Language: English
Authors: Kubra Say
Source: ProQuest LLC. 2024Ph.D. Dissertation, State University of New York at Buffalo.
Availability: ProQuest LLC. 789 East Eisenhower Parkway, P.O. Box 1346, Ann Arbor, MI 48106. Tel: 800-521-0600; Web site: http://www.proquest.com/en-US/products/dissertations/individuals.shtml
Peer Reviewed: N
Page Count: 190
Publication Date: 2024
Intended Audience: Policymakers; Practitioners
Document Type: Dissertations/Theses - Doctoral Dissertations
Education Level: Higher Education
Postsecondary Education
Descriptors: Federal Legislation, Student Loan Programs, Paying for College, College Freshmen, Debt (Financial), Financial Aid Applicants, Need Analysis (Student Financial Aid), Student Costs, Scholarships, State Aid, Economic Impact, Eligibility
Laws, Policies and Program Identifiers: Federal Direct PLUS Loan Program
ISBN: 979-83-8408-549-2
Abstract: Despite substantial investments in financial aid programs, the available aid often falls short of covering the total cost of attendance (Hanson, 2023). Today, college expenses represent 30% of the annual median family income, pushing many students to rely on loans to finance their education (US Census Bureau, 2023). Among student loan borrowers, middle-income students face particular challenges as their family incomes are often too high to qualify for substantial need-based grants but insufficient to cover college costs without incurring significant debt (Long, 2008). Consequently, these students tend to carry larger student loan debts than their peers, exacerbating immediate financial burdens and impacting their long-term economic mobility (Tevington et al., 2017). The Excelsior Scholarship, a statewide tuition-guarantee program, targets a broader range of income groups and aims to alleviate the financial strain for middle-income students by covering tuition costs. Considering this, the current study examines the scholarship's impact on first-year loan borrowing among middle-income students. It analyzes how the scholarship influences the amounts of various types of loans, including subsidized, unsubsidized, and parent PLUS loans. Despite its potential significance, previous research has not explored the causal effects of the Excelsior Scholarship on middle-income students' loan borrowing. Using student-level data from first-year, first-time, domestic in-state freshman students enrolled between 2012 and 2022, this study employs two quasi-experimental approaches, Regression Discontinuity (RD) and Difference-in-Differences (DID), to analyze the causal effects of the scholarship on student loan indebtedness. Leveraging the distinct income cutoff for scholarship eligibility, comparing students with family incomes just above and below the threshold, RD findings indicate an increase in unsubsidized loan borrowing by an average of $1,019 among scholarship recipients, suggesting that while tuition is covered, other educational expenses are not, leading students to rely on these loans. It also reveals significant reductions in parent PLUS loans, with Excelsior recipients borrowing $6,692 less than non-recipients, highlighting the scholarship's effectiveness in reducing financial burdens on families. In the second approach, comparing loan amounts before and after the scholarship's implementation between eligible and non-eligible students, the DID analyses demonstrate that eligibility for the scholarship reduces borrowing loans by $1,850. In particular, it reduces the PLUS loan borrowings by $4,189, showing that anticipation of receiving the scholarship influences financial behaviors. Further, focusing on the local average treatment effect, this study found even larger reductions in loan amounts among actual recipients: $3,820 in total loan amount and $8,676 in parent PLUS loans. These results demonstrate that the Excelsior Scholarship effectively reduces borrowing from parent PLUS loans, particularly among middle-income students, by alleviating the financial responsibilities of their families. This makes higher education more accessible and affordable for this group. However, the scholarship's limited coverage of non-tuition costs leads to a shift in financial pressures toward unsubsidized loans. The findings from this study inform policymakers and practitioners about the potential benefits of similar financial aid programs for middle-income students, contributing to the financial aid literature by addressing a critical research gap and enhancing our understanding of how tuition-guarantee programs impact student loan borrowing behavior. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]
Abstractor: As Provided
Entry Date: 2024
Access URL: https://gateway.proquest.com/openurl?url_ver=Z39.88-2004&rft_val_fmt=info:ofi/fmt:kev:mtx:dissertation&res_dat=xri:pqm&rft_dat=xri:pqdiss:31490334
Accession Number: ED662224
Database: ERIC
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  Data: Despite substantial investments in financial aid programs, the available aid often falls short of covering the total cost of attendance (Hanson, 2023). Today, college expenses represent 30% of the annual median family income, pushing many students to rely on loans to finance their education (US Census Bureau, 2023). Among student loan borrowers, middle-income students face particular challenges as their family incomes are often too high to qualify for substantial need-based grants but insufficient to cover college costs without incurring significant debt (Long, 2008). Consequently, these students tend to carry larger student loan debts than their peers, exacerbating immediate financial burdens and impacting their long-term economic mobility (Tevington et al., 2017). The Excelsior Scholarship, a statewide tuition-guarantee program, targets a broader range of income groups and aims to alleviate the financial strain for middle-income students by covering tuition costs. Considering this, the current study examines the scholarship's impact on first-year loan borrowing among middle-income students. It analyzes how the scholarship influences the amounts of various types of loans, including subsidized, unsubsidized, and parent PLUS loans. Despite its potential significance, previous research has not explored the causal effects of the Excelsior Scholarship on middle-income students' loan borrowing. Using student-level data from first-year, first-time, domestic in-state freshman students enrolled between 2012 and 2022, this study employs two quasi-experimental approaches, Regression Discontinuity (RD) and Difference-in-Differences (DID), to analyze the causal effects of the scholarship on student loan indebtedness. Leveraging the distinct income cutoff for scholarship eligibility, comparing students with family incomes just above and below the threshold, RD findings indicate an increase in unsubsidized loan borrowing by an average of $1,019 among scholarship recipients, suggesting that while tuition is covered, other educational expenses are not, leading students to rely on these loans. It also reveals significant reductions in parent PLUS loans, with Excelsior recipients borrowing $6,692 less than non-recipients, highlighting the scholarship's effectiveness in reducing financial burdens on families. In the second approach, comparing loan amounts before and after the scholarship's implementation between eligible and non-eligible students, the DID analyses demonstrate that eligibility for the scholarship reduces borrowing loans by $1,850. In particular, it reduces the PLUS loan borrowings by $4,189, showing that anticipation of receiving the scholarship influences financial behaviors. Further, focusing on the local average treatment effect, this study found even larger reductions in loan amounts among actual recipients: $3,820 in total loan amount and $8,676 in parent PLUS loans. These results demonstrate that the Excelsior Scholarship effectively reduces borrowing from parent PLUS loans, particularly among middle-income students, by alleviating the financial responsibilities of their families. This makes higher education more accessible and affordable for this group. However, the scholarship's limited coverage of non-tuition costs leads to a shift in financial pressures toward unsubsidized loans. The findings from this study inform policymakers and practitioners about the potential benefits of similar financial aid programs for middle-income students, contributing to the financial aid literature by addressing a critical research gap and enhancing our understanding of how tuition-guarantee programs impact student loan borrowing behavior. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]
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RecordInfo BibRecord:
  BibEntity:
    Languages:
      – Text: English
    PhysicalDescription:
      Pagination:
        PageCount: 190
    Subjects:
      – SubjectFull: Federal Legislation
        Type: general
      – SubjectFull: Student Loan Programs
        Type: general
      – SubjectFull: Paying for College
        Type: general
      – SubjectFull: College Freshmen
        Type: general
      – SubjectFull: Debt (Financial)
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      – SubjectFull: Financial Aid Applicants
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      – SubjectFull: Need Analysis (Student Financial Aid)
        Type: general
      – SubjectFull: Student Costs
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      – SubjectFull: Scholarships
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      – SubjectFull: State Aid
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      – SubjectFull: Economic Impact
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      – SubjectFull: Eligibility
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      – SubjectFull: Federal Direct PLUS Loan Program
        Type: general
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      – TitleFull: Reducing Student Loan Indebtedness: Examining the Excelsior Scholarship's Role in Loan Borrowing among Middle-Income Students
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