Federal financial aid depends on a student's Expected Family Contribution (EFC)--the higher her EFC, the less aid she receives. We estimate the effects of increasing federal aid by leveraging an increase in the income threshold for an "automatic zero EFC," which qualifies students for the most generous federal aid. We find some evidence for crowd-out of federal student loans and greater enrollment but no effect on institutional grants, working while in school, or choosing a STEM major. We argue that volatility in federal aid from year to year is blunting the effect of greater aid generosity.
Second version, April 10, 2023
H52: National Government Expenditures and Education
H81: Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
I22: Educational Finance