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

See all articles by Christopher Cornwell

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 Mark 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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