Last fall, Free the Facts hosted Dr. Melanie Zaber of the RAND Corporation for a conversation on income share agreements, or student loan repayment plans that could incentivize students to attain their degrees and lenders to invest in their success. However, income share agreements are just one of many proposals for increasing graduation rates while easing student loan debt. In a February report published by the RAND Corporation, Dr. Zaber and economist Dr. Drew M. Anderson explored the relationship between New Jersey’s Tuition Aid Grant (TAG) program and college persistence and completion rates.

TAG is America’s largest state-funded grant program per state resident college student, offering anywhere from $1,000 to $13,000 per year to students with qualifying income levels. Despite being so generously funded, however, there is little data on how the aid impacts recipients’ success in college.

The RAND researchers sought to understand how an additional $1,000 in TAG aid could improve student outcomes. They measured increases in both “short-term persistence,” or re-enrollment in one additional year of college, and “long-term completion,” or graduation from a program. By tracking data from over 450,000 grant recipients from 52 colleges and universities in New Jersey, the researchers found some interesting patterns.

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1. At public universities, TAG increased the rate of on-time bachelor's degree completion.

The research showed that receiving an additional $1,000 in TAG awards improved the average graduation rate of 35 percent by 2.6 percentage points at public universities. This increase was significantly higher than those found in studies of other aid programs. However, the impact appeared to be less significant for the lowest-income group of student recipients.

This overall effect can be seen in the figure below, which illustrates the four-year graduation rate at public universities:

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The “New Jersey Eligibility Index” found in this figure is the TAG program’s scale to determine each student’s ability to pay based on household income. Higher values on the eligibility index indicate a greater ability to pay - and, in turn, a lower TAG award.

There are also grant cutoffs, represented by the black lines in the figure. Students on either side of the cutoffs receive different TAG awards despite being in similar positions on the eligibility index. As you can see, the rate of graduation is significantly higher (indicated by a larger dot size) on the left side of the cutoffs. This suggests that providing additional TAG aid for lower-income students can improve their graduation rates.

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2. At private colleges and universities, TAG affects the lowest-income students most.

Unlike the findings for public universities, the researchers discovered that TAG was a lot more helpful for the lowest-income students at private non-profit colleges and universities. Even using relatively small sample sizes, the researchers found statistically significant effect estimates of 2.1, 1.9, and 1.7 percentage points for these students.

On the contrary, for more moderate-income students at these schools, the RAND researchers found that additional TAG aid did not increase graduation rates. This was likely a result of other grants and scholarships filling in the gaps and offsetting the impact of additional TAG aid for these students.

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What does this mean for the future of state-funded grant programs?

Given these findings, it’s clear that when TAG is funded effectively, college degree completion in the state of New Jersey improves. Be that as it may, the researchers noted that there was little evidence to prove that TAG aid shapes whether college applicants enroll in college. Thus, they recommend that the state should focus its efforts on informing unenrolled students about TAG awards to encourage higher enrollment rates.

New Jersey’s TAG program serves as a strong example of how state-funded grants can bolster academic achievement across an entire state. According to the RAND researchers, increasing funding for this program could accelerate degree completion and achieve the state’s goal of having 65% of New Jerseyans attain a post-secondary degree or certification by 2025. As other states develop their own plans to improve higher education, New Jersey’s TAG program can serve as a powerful example.