The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's Hope Scholarship

Univ. of Georgia Economics Working Paper No. 00-480; Central European University Economics Working Paper No. WP2/2003

44 Pages Posted: 31 Jul 2001  

Christopher Cornwell

University of Georgia, C. Herman and Mary Virginia Terry College of Business, Department of Economics

David B. Mustard

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics; IZA Institute of Labor Economics; University of Georgia Law School

Deepa J. Sridhar

Ashenfelter & Ashmore

Date Written: March 21, 2003

Abstract

This paper examines the effects of Georgia's merit-based HOPE Scholarship on college enrollments. Until the late 1980s, only a small fraction of total student aid was allocated on the basis of merit, but in the last decade state governments have stepped in,distributing billions of dollars in "HOPE-style" merit aid. Introduced in 1993, the HOPE Scholarship covers tuition, fees and book expenses for students attending Georgia public colleges, and provides a subsidy of comparable value to students attending in-state private colleges, without any income restrictions. Treating HOPE as a natural experiment, we contrast enrollment rates in Georgia with those in the other member states of the Southern Regional Educational Board using IPEDS data for the period 1988-97. We estimate that the scholarship increased the overall freshmen enrollment rate by 6.9 percentage points, with the gains concentrated in 4-year schools. We also find that HOPE raised the enrollment rates of both blacks and whites in Georgia schools, with the state's historically-black institutions playing an imprtant role. Finally, our results suggest that the total HOPE-induced increase represents about 12 percent of high-school graduates who qualified for the scholarship and 21 percent of those who took the award. However, because the overall HOPE effect involves enrollees at 2-year schools who are more likely recipients of the non-merit-based HOPE Grant, the total program enrollment response amounts to less than 10 percent of all freshmen program beneficiaries.

JEL Classification: I2

Suggested Citation

Cornwell, Christopher and Mustard, David B. and Sridhar, Deepa J., The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's Hope Scholarship (March 21, 2003). Univ. of Georgia Economics Working Paper No. 00-480; Central European University Economics Working Paper No. WP2/2003. Available at SSRN: https://ssrn.com/abstract=277313 or http://dx.doi.org/10.2139/ssrn.277313

Christopher Mark Cornwell (Contact Author)

University of Georgia, C. Herman and Mary Virginia Terry College of Business, Department of Economics ( email )

Terry College of Business
U of Georgia
Athens, GA 30602
United States
706-542-3670 (Phone)
706-542-3376 (Fax)

David B. Mustard

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States
706-542-3624 (Phone)
706-542-3376 (Fax)

HOME PAGE: http://www.terry.uga.edu/~dmustard/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

University of Georgia Law School

225 Herty Drive
Athens, GA 30602
United States

Deepa J Sridhar

Ashenfelter & Ashmore ( email )

32, Nassau Street
Princeton, NJ 08542
United States
609-683-4504 (Phone)

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