What Does Early Decision Buy: Higher Acceptance and Lower Money?

Stacy Dickert-Conlin, Michigan State University
Gabrielle Chapman, Syracuse University

While an increasing number of students apply early decision (ED) to college, some prestigious institutions like Harvard and the University of Virginia are dropping their ED policies. This dichotomy reflects proponents’ arguments that ED reduces uncertainty in the process and critics’ suggestions that ED policies give preference to students with higher ability-to-pay. Evidence from elite schools shows that students with higher ability-to-pay are more likely to apply ED and colleges lower their standards for ED applicants (see Avery et al. 2003). We confirm this using data from selective liberal art schools, which have many close substitutes. Although this finding is consistent with a concern that applying ED lowers financial aid awards, conditional on being accepted, we find no evidence that ED applicants receive lower financial aid awards. However, ED applicants with higher financial aid awards, and therefore lower ability-to-pay, are less likely to enroll and thereby break the ED contract.