Report: Financial aid reduces likelihood of donations to universities

As institutions of higher education become more reliant on alumni contributions, new research from a Princeton University economics professor has found students who receive financial aid in the form of loans and scholarships are less likely to donate to their alma maters, regardless of personal income.

According to Harvey S. Rosen, a professor of economics and business policy at Princeton University, scholarship recipients are less likely to be in the top 10 percent of givers in their class in any given year — but it's not because they have relatively low incomes after they graduate.

"Anyone can come up with an example of a scholarship kid who becomes a billionaire and donates a building, but there's not enough of it going on," Rosen said. "I was expecting that the scholarship recipients would have higher probabilities of giving than we found, but that's because of these anecdotes."

For his research, Rosen examined data on alumni giving from 13,831 alumni who graduated between 1993 and 2005 at an anonymous private research university. Rosen said that, somewhat surprisingly, the effects of having received aid in college do not change with age or income levels, noting that the psychological "annoyance effect" that's associated with paying off debt — even as low as $200 — persist beyond the repayment period. In fact, Rosen found that receiving small loans reduces the probability of giving, while moderate-sized loans have little effect — and the receipt of any scholarship in itself reduces contributions by 18 percent.

In terms of a university's top donors — which Rosen defined as someone who donated an amount above or equal to the 90th percentile of gifts in a class, accounting for 50.8 percent of gifts to the anonymous university in 2009 — the effect of receiving a scholarship as an undergraduate is significantly negative, and each thousand-dollar increase in loans reduces an alumnus' probability of being a top donor, regardless of income.

According to Rosen, one possible explanation for decreased direct donations from scholarship recipients is that they are instead targeting their contributions to other institutions that offer aid to students who want to attend a university, like the United Negro College Fund. Rosen said he ruled out alienation from campus culture, since his research factored in the activities in which scholarship recipients participated — like fraternities and varsity sports — and found no significant effect of loans on giving for individuals who were not involved in activities.

Rosen said he does not know what the implications of the data are going forward, because "so many other things that universities are doing is changing."