| Laura T. Hamilton
Indiana University
Parental financial investments and college student achievement
FINAL REPORT
In the American system of higher education, the financial burden of a college education often falls upon the shoulders of parents. Research suggests that parental financial investments play a critical role in the reproduction of inequality by facilitating both college aspirations and attendance’Äîessentially getting students to the college gates. However, we know less about how differences in parental financial aid shape student achievement during postsecondary schooling. Building on key sociological theories of parental investment, most work by educational scholars implicitly assumes that parental aid has a positive effect on student achievement that increases with the level of support; however, economic work on ’Äúmoral hazard’Äù suggests just the opposite’Äîthat parental aid creates an academic disincentive for students. In this paper I use five waves of nationally representative data collected by the National Center for Education Statistics to examine these and other possibilities. I assess how the amount of parental financial aid influences college students’Äô performance and persistence. My findings stand in stark contrast to a ’Äúmore is better’Äù approach. For example, as parental aid increases, students’Äô GPAs decrease. The negative effect of parental aid is largely consistent across race, gender, and social class. With regards to degree completion, there is strong evidence that low to moderate amounts of aid have the expected, positive effect. However, the returns of parental aid diminish around 12K, net of controls’Äîto the point that some parents literally erase any of the gains they made with their investments. For some specific populations, such as students with the highest SAT scores, high levels of parental aid can even become detrimental to their chances of graduating. The findings of this paper are, therefore, most consistent with the economic theory of moral hazard. When parents subsidize their children’Äôs education at high levels, they may provide a disincentive for performance by removing the cost of failure. In future work I explore why moral hazard occurs in higher education.
Back to Funded Dissertation Grants Page |