The majority of states in the U.S. now fund merit-based financial aid programs, the effects of which depend on how strongly students react to changes in college costs. I estimate such reactions using quasi-experimental aspects of a recent Massachusetts merit scholarship program intended to attract talented students to the state public colleges. This paper is the first to document heterogeneity in price sensitivity among students of varying academic abilities. My primary result is that, in spite of its small monetary value, the scholarship induced 6% of winners to choose four-year public colleges over four-year private colleges, the average of a large effect on the lowest ability winners and no effect on the highest ability winners. The bulk of funds nonetheless flowed to students who would have attended public colleges anyway, and the scholarship had no effect on the overall college attendance rate, which for winners was already above 90%. These findings have implications for the design of future government-sponsored financial aid programs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number
0607-13.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: