Second Try's a Charm: The Impact of Financial Aid Policy on Course-Retaking Behavior for Low-Income Students

Abstract In this paper, we examine the impact of a change to federal financial aid policy that gave aided students increased access to course retaking. Prior to Fall 2011, students receiving federal financial aid could not count repeated coursework toward their full-time enrollment count, despite many universities rolling out course retaking and grade forgiveness policies for their students. We use administrative records from San Francisco State University to examine how the 2011 federal financial aid policy change affected student outcomes for Pell Grant recipients. We find that the policy change led Pell-eligible students to be 3 percentage points more likely to repeat a course in which they earned a D grade on the initial attempt (approximately a 14 percent increase). We also find evidence that Pell-eligible students were more likely to attempt and earn higher credit hours after the policy change. However, despite this finding, there is no accompanying improvement in academic standing or increase in continued enrollment after the policy change. Results suggest that the policy may have influenced Pell-eligible students to take “riskier” classes with higher failure rates in science, technology, engineering, and math and business.