Financial Aid and Student Bargaining Power

Abstract

It is an understatement to say that financial aid is a key component of the college admissions process. For the student and her family, financial aid is a way to afford quality post secondary education that otherwise may have been unobtainable. For the college, financial aid is a method to compete for the best and brightest students. For policymakers, financial aid is a subsidy for educational expenses where constituencies often differ over its merits. This research attempts to analyze the financial aid process by considering the ability of a student to act strategically through the bargaining process. A theoretical model is developed using a first-price sealed auction model. This model is evaluated using empirical evidence from the 1996 National Postsecondary Student Aid Study (NPSAS:96). It is shown that a student can maximize her financial aid offer by increasing the number of schools to which she has been accepted after controlling for ability, demographics, and institutional characteristics.3

The Early Decision Option in College Admission and Its Impact on Student Diversity

“…In addition, bargaining power can affect financial aid offers. Lang (2007), for example, finds evidence of a strategic advantage for students who have two or more college acceptances, which leads to higher financial aid awards. 15 However, these studies leave one important question partially unanswered.…”