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

46 Pages Posted: 9 Mar 2016 Last revised: 27 Oct 2016

See all articles by Timothy Bartik

Timothy Bartik

W.E. Upjohn Institute for Employment Research

Brad Hershbein

W.E. Upjohn Institute for Employment Research

Marta Lachowska

W.E. Upjohn Institute for Employment Research; Stockholm University - Department of Economics

Date Written: September 2016

Abstract

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.

Keywords: place-based scholarship, enrollment, college completion, natural experiment, difference-in-differences, financial aid policy, benefit-cost analysis

JEL Classification: I21, I22, I24

Suggested Citation

Bartik, Timothy and Hershbein, Brad and Lachowska, Marta, The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise (September 2016). Available at SSRN: https://ssrn.com/abstract=2744756 or http://dx.doi.org/10.2139/ssrn.2744756

Timothy Bartik (Contact Author)

W.E. Upjohn Institute for Employment Research ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

Brad Hershbein

W.E. Upjohn Institute for Employment Research ( email )

Marta Lachowska

W.E. Upjohn Institute for Employment Research ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

HOME PAGE: http://www.upjohn.org/AboutUs/Staff/Lachowska

Stockholm University - Department of Economics ( email )

Stockholm University
Stockholm, 10691
Sweden

HOME PAGE: http://www2.sofi.su.se/~mla/

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