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The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise

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As the costs of higher education rise, many communities have begun to adopt their own financial aid strategy: place-based scholarships for students graduating from the local school district. Some place-based scholarships impose merit- and/or need-based restrictions, while others require little more than residency and graduation. In this paper, we examine the reach and cost-effectiveness of the Kalamazoo Promise, one of the more universal and more generous place-based scholarships. Building upon estimates of the program’s heterogeneous effects on degree attainment, individual-level scholarship cost data, and projections of future earning profiles by education, we examine the Promise’s benefit-cost ratios for different types of students differentiated by income, race, and gender. Although the average break-even rate of return of the program is about 11 percent, rates of return vary greatly by group. The Promise has high returns for both low-income and non-low-income groups, for nonwhites, and for women, while benefit assumptions matter more for whites and men. Our results show that universal scholarships can reach many students and have a high rate of return, particularly for places with a high percentage of African American students.

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  • Timothy J. Bartik & Brad J. Hershbein & Marta Lachowska, 2016. "The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise," Upjohn Working Papers 16-252, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:16-252
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    Cited by:

    1. Lindsay C. Page & Jennifer E. Iriti & Danielle J. Lowry & Aaron M. Anthony, 2019. "The Promise of Place-Based Investment in Postsecondary Access and Success: Investigating the Impact of the Pittsburgh Promise," Education Finance and Policy, MIT Press, vol. 14(4), pages 572-600, Fall.
    2. Brad J. Hershbein & Isabel McMullen & Brian Pittelko & Bridget Timmeney, 2021. "Beyond degrees: Longer term outcomes of the Kalamazoo Promise," Upjohn Working Papers 21-350, W.E. Upjohn Institute for Employment Research.
    3. Timothy J. Bartik & Brad J. Hershbein, 2018. "Degrees of Poverty: The Relationship between Family Income Background and the Returns to Education," Upjohn Working Papers 18-284, W.E. Upjohn Institute for Employment Research.

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    More about this item

    Keywords

    place-based scholarship; enrollment; college completion; natural experiment; difference-in-differences; financial aid policy; benefit-cost analysis;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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