Bucky, Becky, and Student Financial Aid Policy Design

• Published date: 01 January 2024
• DOI: http://doi.org/10.1177/00027162241293273
• Author: Elise A. Marifian,Jeffrey A. Smith,Sarah E. Turner
• Date: 01 January 2024
• Subject Matter: Policy Translation

200 ANNALS, AAPSS, 711, January 2024

DOI: 10.1177/00027162241293273

Bucky, Becky,

and Student

Financial Aid

Policy Design

By

ELISE A. MARIFIAN,

JEFFREY A. SMITH,

and

SARAH E. TURNER

1293273ANN THE ANNALS OF THE AMERICAN ACADEMYBUCKY, BECKY, AND STUDENT FINANCIAL AID POLICY DESIGN

research-article2024

Bucky’s Tuition Promise (BTP) at the University of

Wisconsin–Madison offers generous financial aid to

low-income, in-state students. Unlike many similar

programs at other public universities, financial eligibil-

ity for BTP depends solely on a family’s adjusted gross

income (AGI), rather than on the Expected Family

Contribution (EFC) from the Free Application for

Federal Student Aid (FAFSA) or some function of the

poverty line. This program design aims to make eligibil-

ity simpler and more transparent for students and their

families and thereby to encourage application and

matriculation. We investigate the implications of the

program design for who does and does not receive

additional institutional aid, with a particular focus on

the marginal group of BTP-eligible students who lack

federal Pell Grant eligibility. With this analysis, we aim

to motivate a broader discussion of different notions of

equity in financial aid administration and the tough

trade-offs implicit in simplifying eligibility criteria.

Keywords: financial aid; FAFSA; Pell Grant; Rebecca

Blank; University of Wisconsin–Madison

In American higher education, students from

low- and moderate-income families are under-

represented at the most resource-intensive

colleges and universities. In the past quarter

Correspondence: econjeff@ssc.wisc.edu

Elise A. Marifian is an applied microeconomist inter-

ested in understanding the causes and consequences of

inequality and poverty. She studies questions at the

intersection of public economics and labor economics,

with a current focus on topics in higher education, child

care, and criminal justice.

Jeffrey A. Smith is Paul Heyne Distinguished Chair in

Economics and Richard Meese Chair in Applied

Econometrics at the University of Wisconsin–Madison.

He studies the applied econometrics of program evalu-

ation, with a substantive focus on social and educa-

tional programs and a methodological focus on

heterogeneous treatment effects.

Sarah E. Turner is Souder Family Endowed Chair and

University Professor of Economics and Education at the

University of Virginia. Her research areas of expertise

include the economics of education, labor economics,

and higher education policy.

BUCKY, BECKY, AND STUDENT FINANCIAL AID POLICY DESIGN 201

century, a substantial body of research literature has demonstrated that “achieve-

ment gaps” in high school do not suffice to explain the income gaps in enrollment at

top colleges and universities in both the public and private sectors (e.g., Dillon and

Smith 2017; Hoxby and Avery 2013). This residual gap suggests a role for financial

factors. Potentially important deterrents to enrollment in well-resourced institutions

include the actual (or “net”) price (i.e., the sticker price minus grant aid) that stu-

dents face, lack of information regarding potentially large differences between a

particular student’s net price and the institution’s sticker price, and uncertainty

about how the net price will evolve over time as the student completes their degree.

Private colleges and universities in the U.S. have long relied on “high-tuition,

high-aid” pricing strategies, and many public research universities have shifted to

this form of pricing in recent years (Cook and Turner 2022). At many colleges,

the level of grant aid provided to low- and moderate-income students has

increased markedly, such that the “net price” of attending an elite university may

be lower than what a student would pay to attend a community college or

regional, open-access, four-year institution (Cook and Turner 2022; Hoxby and

Turner 2013). Public universities (particularly the most selective flagships) also

have increased the grant support they offer, particularly to in-state students,

while the most selective private universities offer full grant aid to meet students’

financial need.1 Engaging in price discrimination via financial aid offers allows

colleges to obtain economically diverse student bodies while avoiding the sub-

stantial revenue loss that charging all students the same low price would entail.2

Because colleges only reveal their net prices well after students submit their

applications, students must form expectations about them as part of the process

of deciding which colleges merit an application. Put differently, students and

their families face substantial uncertainty regarding the affordability of specific

colleges while making decisions about standardized testing, college visits, and

college application submission. The college choice process often spans months:

Students apply to a set of institutions, subsequently apply for financial aid, wait

for admissions and financial aid offers, and then make matriculation decisions.

Given the manifold burdens the process imposes on students (and their parents),

they may refrain from applying to colleges and universities that they perceive to

be unaffordable (Hoxby and Turner 2013). Logically, transparency in college

pricing matters. Families cannot (fully) respond to prices that they do not (yet)

know. In addition, because earning a college degree typically takes (at least) four

years, expectations of price stability matter for families’ choices.

The University of Wisconsin–Madison (UW–Madison) offers an interesting

case study within the ecosystem of state university financial aid programs. In 2018,

NOTE: We are grateful to Diane Schanzenbach, Leslie McGranahan, John Dreger, Nicholas

Hillman, Derek Kindle, Hanns Kuttner, Shane Maloney, Lesley Turner, Bonniejean Zitske, our

audience at the September 2024 CESifo education group meetings, and the many participants

at the Authors’ Conference in Memory and Honor of Rebecca M. Blank in February 2024.

The research reported here was supported by the Institute of Education Sciences, U.S.

Department of Education, through Award #R305B150003 to the University of Wisconsin–

Madison. The opinions expressed are those of the authors and do not represent views of the

Department of Education or the University of Wisconsin–Madison.