College and Post-College Outcomes of Merit-Based Financial Aid

Session Submission Type: Panel

Abstract

The expansion of broad-based state merit aid programs represents one of the most significant financial aid trends of the past thirty years. Since Georgia launched HOPE Scholarships in 1993, over a dozen states have adopted large-scale college scholarship programs with eligibility based solely on student academic achievement. While researchers have extensively examined merit aid’s effects on overall college attendance and choice, as well as student performance in high school and college, crucial gaps remain in our understanding of the medium- and long-term outcomes of these scholarships. Notably, there is relatively little research on how merit aid affects student outcomes in college, such as choice of major, persistence, and graduation, and how merit aid influences post-college outcomes, such as earnings and entrepreneurial activity. This panel addresses these gaps with three papers examining two of the largest state merit aid programs: Georgia’s and Tennessee’s HOPE Scholarship programs.

The three papers in this panel each make use of unique student-level data to examine detailed college and post-college outcomes that have been understudied in previous research. The paper by Yu examines the effect of Tennessee’s program on post-college earnings of scholarship recipients. Using regression-discontinuity design, the authors examine how both initial scholarship receipt and scholarship loss affect students’ income after college as well as the intermediate mechanisms that may mediate these relationships, particularly for students most at-risk for scholarship loss. The Rubenstein et al. paper examines a specific aspect of post-college outcomes for students in Georgia: the scholarships’ effects on business formation. Using data on all students in the University System of Georgia matched to business registration data from the Georgia Secretary of State, the authors examine whether HOPE Scholarship receipt - which dramatically reduces the net cost of college - leads to higher levels of entrepreneurship among recipients, focusing on which students are most affected and the types of businesses they are likely to start. The Kim article employs regression-discontinuity design and detailed student-level data from Georgia’s large school districts to examine whether HOPE Scholarships affect not only whether students attend the college but also which college they attend by examining in-state college enrollment, four-year, institution selectivity, and student’s major choice for subgroups of students with diverse background. 

Together, these papers provide important new insights on the medium and longer-term outcomes from state merit aid programs, focusing particularly on students from lower-income households. The latter issue is especially important given that merit aid has often been criticized for disproportionately benefiting students who would qualify for limited or no need-based aid. The findings will provide policymakers with insights to help further refine these programs by examining the programs’ efficiency and equity implications, as well as the costs and benefits associated with large-scale investments in merit aid.

Policy Area

• Education

Secondary Policy Area

• Poverty and Income Policy

Chair

• Katharine Meyer, Brookings Institution

Discussants

• Taylor K. Odle, University of Wisconsin-Madison

• Kevin Stange, University of Michigan

Individual Presentations

• Effect of Financial Aid on Student Academic and Labor Market Outcomes: The Case of Tennessee HOPE - Presenting Author: Chenjun Yu, University of Michigan; Non-Presenting Co-Author: Jennifer M Trigger, University of Michigan Ann Arbor; Non-Presenting Co-Author: Brian P McCall, University of Michigan Ann Arbor

• Does State Merit Aid Increase Entrepreneurship? Evidence from Georgia’s HOPE Scholarship Program - Non-Presenting Co-Author: Paige Clayton, Georgia Institute of Technology; Presenting Author: Ross Rubenstein, Georgia State University

• The Role of Merit-Based Aid in College Enrollment and Selection: Evidence from Georgia’s HOPE Scholarship - Presenting Author: Bogyung Kim, Georgia State University

• A Loanly Road to Teaching: Recruiting Talented Students Through Service Scholarships - Presenting Author: Nicolas Rojas Souyet, Teachers College, Columbia University

Organizer

• Chenjun Yu, University of Michigan