Understanding Racial and Ethnic Differences
The past two decades witnessed some fundamental changes in American postsecondary educational finance (McPherson & Schapiro, 1991, 1998; Orfield, 1992; St. John, 1994; Slaughter & Leslie, 1997). The federal government shifted the means of fulfilling the commitment to equal opportunity in postsecondary education from primarily using grants to mainly using loans (St. John, 1994). State support for public colleges and universities decreased as an overall trend across the United States (Callan & Finney, 1997). This policy shift at the state level was alleged to lead to the sustained increase in the tuition charges in public institutions (Paulsen, 1991). At the institutional level, concerns about student enrollment have triggered the bidding war in recruiting and retaining academically well-prepared students. Thus, tuition pricing and the awarding of financial aid increasingly play the role as institutional levers in enrollment management (McPherson & Schapiro, 1998).
As a result of these policies, the burden of paying for college was shifted from the general public to individual students and their families (Callan & Finney, 1997; Mumper, 1996). Educational attainment for minority and low-income students is a particularly important issue in the new financing environment (Baker & Velez, 1996; Carter & Wilson, 1996; Orfield, 1992). On the one hand, numerous studies suggest that minority students are competitively disadvantaged in access to higher education, choice of colleges, and degree completion in American post-secondary education (Baker & Velez, 1996; Carter, 1999; Carter & Wilson, 1996; Castle, 1993; Pascarella & Terenzini, 1991). On the other hand, economists consistently confirm the high earning premium of college degree recipients in the labor market compared to nonrecipients (Becker, 1992; Murphy & Welch, 1992; Leslie & Brinkman, 1988). If the policy changes have disproportionally negative effects on educational attainment of minority students, then the economic a nd social well-being of minority students and society as a whole will inevitably be imperiled.
Previous studies confirmed that students indeed respond to college tuition prices and financial aid awards (Heller, 1997, 1999; Leslie & Brinkman, 1988). Research also indicates that minority students are more sensitive to prices and less willing to use educational loans (Kaltenbaugh, St. John, & Starkey, 1999; St. John, 1991; St. John & Noell, 1989). Further understanding of the influence of financial aid awards on persistence by diverse groups can help inform policymakers and institutional administrators about strategies that can equalize opportunity and improve institutional diversity.
This study assesses the impact of policy shifts in financial aid in a state higher education system on within-year persistence by different racial/ethnic groups. There are strong theoretical arguments that ability to afford continuous enrollment is best measured within year (Carroll, 1987; Dresch, 1975). Traditional college-age students often reflect on the academic and social aspects of their college experience between years, when they return home, which is a good reason why some researchers consider year-to-year persistence (Pascarella & Terenzini, 1980, 1991). However, analysts who have compared within-year and year-to-year persistence models have found that the within-year is generally better at measuring the effects of student aid (Somers, 1992; Somers & St. John, 1997), but both approaches have value. This article examines student within-year persistence in a state public higher education system. We focus on persistence of African Americans and Hispanics, and use White students as a comparison group. S pecifically, we try to answer these research questions: (1) Did changes in the combination of federal and state aid programs affect the adequacy of financial aid awarded to students from diverse groups in persisting in the state higher education system? …