Can Incremental Aid Help Your Students?

Can Incremental Aid Help Your Students?

Evan Weissman, MDRC / Student ARC Blog / December 22, 2017
student on phone and writing

If you found your way to this blog, you probably already know that financial aid is instrumental for helping many students access college and for helping them succeed despite the financial challenges that can hinder their success. But short of providing additional financial aid, there may be policies and practices in the structure and provision of aid which can also help students better succeed.

At community colleges and/or institutions with generous state or other financial aid, many students may receive financial aid “refunds” — the grant and loan aid that remains after tuition and fees are paid. Typically, these refunds are disbursed in a large lump sum at the beginning of the term. Disbursing financial aid in smaller increments throughout the term, like a paycheck, may be a better way to support students. MDRC’s Aid Like A Paycheck evaluation is rigorously testing whether biweekly refunds can improve students’ financial or academic outcomes. This post provides an overview of early findings from two community colleges that each provided biweekly refunds to a randomly selected group of students, while providing standard lump-sum refunds to an equivalent group of students. It also offers advice to college leaders who think that incremental disbursements may be right for their students.

Early results show that biweekly disbursements of existing financial aid reduced students’ use of federal loans and their debts to the college after one semester. So far, there is little consistent evidence that biweekly disbursements improved students’ academic outcomes, although at one of the schools in the study students experienced a six percentage point increase in persistence to their second semester of college.

In 2018, MDRC will present final results based on longer follow-up and additional students in the study. In the meantime, the jury is still out and these results should be viewed with caution. Nevertheless, biweekly disbursements may be of interest to colleges with a significant number of students who receive refunds. The policy may be particularly appealing to colleges wishing to be transparent in aligning the awarding of aid with continued enrollment. Disbursing aid incrementally as students progress through the semester may signal to students and others that financial aid refunds are intended to support students’ expenses while in school — and may reduce the likelihood of students owing debt to the college as a result of receiving grant aid that they must later unexpectedly pay back.

If you are at a college considering incremental disbursements, here are some useful lessons from early implementers:

First, know that changing the frequency and timing of aid disbursement requires significant upfront planning, review of college policies, adjustment of software systems, and training of staff. Administrators and staff from financial aid, IT, and business offices may all need to be involved in the planning and implementation of the new policy. Our interim report describes some of these issues and lessons in more detail.

Second, recognize that financial aid policies and procedures are often unclear to students, and that increasing the number of disbursements students receive can increase this confusion. Our interim report details how students at the two colleges testing biweekly disbursements experienced confusion about the timing and amount of their aid — particularly if they had previously received aid as a lump sum — and how the policy of biweekly disbursements appeared to increase students’ financial stress at the start of the semester.

In our report, we posed a question for our future research: Would implementing the policy college-wide (as opposed to testing it with a subset of students) allow for clearer and more efficient communications and implementation? We posited that college-wide adoption and pervasive messaging might mitigate the anxiety that had been caused by the policy at the two primary study colleges. Recent interviews with students and staff at a third community college — where biweekly disbursements became standard policy for all students in 2016-2017 — provide encouraging evidence that colleges can communicate the policy broadly and clearly, and that students can understand and appreciate the potential advantages of biweekly disbursements. When biweekly disbursements became the norm college-wide, students appeared to receive clearer messaging not only from the college, but often also from their peers who received their financial aid according to the same policy and timeline. Our final report in 2018 will provide a closer look at this topic.

Third, remember that a policy of biweekly disbursements is a modest intervention and that it does not increase the resources provided to students. Often, the total amount of aid provided does not come close to covering the cost of attendance. Many low-income students have to work while attending college, and many struggle to afford rent, food, and transportation to and from school. Changes in disbursement timing are unlikely to solve many of the problems related to unmet financial need. Solving these problems may require additional supports or aid, be it through emergency aid or other forms.