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The New Merit Aid

In: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It

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  • Susan Dynarski

Abstract

Since the early Nineties, over a dozen states have established broad-based merit aid programs. The typical program waives tuition and fees at public colleges and universities in one’s home state. Unlike traditional, elite merit programs such as the National Merit Scholarship, the new merit aid requires relatively modest academic credentials and annually funds hundreds of thousands of students. This paper examines how merit aid programs in seven states have affected an array of schooling decisions, paying particular attention to how the effects have varied by race and ethnicity. I find that the new programs typically increase the attendance probability of college-age youth by five to seven percentage points. The merit programs also shift students toward four-year schools and away from two-year schools. Surprisingly, the Georgia HOPE Scholarship, which widened racial gaps in college attendance (Dynarski, 2000) is found to be atypical in its distributional impact. The other states’ merit aid programs have actually closed racial and ethnic gaps in attendance. I attribute the Georgia program’s unique distributional effect to its relatively stringent academic requirements and a recently-eliminated provision that channeled the most generous scholarships to higher-income students.

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This chapter was published in:

  • Caroline M. Hoxby, 2004. "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It," NBER Books, National Bureau of Economic Research, Inc, number hoxb04-1, May.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10098.

    Handle: RePEc:nbr:nberch:10098

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    References

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    1. Thomas J. Kane, 2003. "A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going," NBER Working Papers 9703, National Bureau of Economic Research, Inc.
    2. Dynarski, Susan, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 629-62, September.
    3. Rubenstein, Ross & Scafidi, Benjamin, 2002. "Who Pays and Who Benefits? Examining the Distributional Consequences of the Georgia Lottery for Education," National Tax Journal, National Tax Association, vol. 55(N. 2), pages 223-238, June.
    4. Kane, Thomas J, 1994. "College Entry by Blacks since 1970: The Role of College Costs, Family Background, and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 878-911, October.
    5. Rouse, Cecilia Elena, 1995. "Democratization or Diversion? The Effect of Community Colleges on Educational Attainment," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 217-24, April.
    6. Christopher M. Cornwell & David B. Mustard & Deepa Sridhar, 2005. "The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's HOPE Scholarship," HEW 0501002, EconWPA.
    7. Thomas S. Dee, 2003. "Are There Civic Returns to Education?," NBER Working Papers 9588, National Bureau of Economic Research, Inc.
    8. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
    9. Susan M. Dynarski, 1999. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," NBER Working Papers 7422, National Bureau of Economic Research, Inc.
    10. Susan Dynarski, 2002. "The Behavioral and Distributional Implications of Aid for College," American Economic Review, American Economic Association, vol. 92(2), pages 279-285, May.
    11. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
    12. Gary T. Henry & Ross Rubenstein, 2002. "Paying for grades: Impact of merit-based financial aid on educational quality," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(1), pages 93-109.
    13. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
    14. Christopher Cornwell & David B. Mustard, 2007. "Merit-Based College Scholarships and Car Sales," Education Finance and Policy, MIT Press, vol. 2(2), pages 133-151, February.
    15. Thomas S. Dee & Linda A. Jackson, 1999. "Who Loses HOPE? Attrition from Georgia’s College Scholarship Program," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 379-390, October.
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