Who Does Aid Help? Examining Heterogeneity in the Effect of Grant Aid on Achievement

Abstract

Does grant aid impact achievement differently for low- and high-income students? I exploit the eligibility requirements of a state scholarship program that awards additional funds to merit aid recipients majoring in science, technology, engineering, or math (STEM) fields. A triple difference design, using administrative data from the University of South Carolina and exploiting differences over time by merit aid recipient status and by major type (STEM or non-STEM), shows that grant aid increases the GPAs and graduation prospects of low-income students by 0.169 GPA points and 10.7 percentage points, respectively, but has little impact on high-income students. Additional analysis suggests that the reduction in work-study among low-income students may be a potential mechanism for the heterogeneous achievement effects of grant aid by income. These results suggest that merit aid programs could be targeted more effectively than most currently are.

Keywords: achievement, heterogeneous effects by income, grant aid

JEL Classification: I22, I24