Dynarski, Susan. "The New Merit Aid." KSG Faculty Research Working Paper Series RWP04-009, February 2004.
Since the early Nineties, over a dozen states have established broad-based merit aid programs. The typical program waives tuition and fees at public colleges and universities in one’s home state. Unlike traditional, elite merit programs such as the National Merit Scholarship, the new merit aid requires relatively modest academic credentials and annually funds hundreds of thousands of students. This paper examines how merit aid programs in seven states have affected an array of schooling decisions, paying particular attention to how the effects have varied by race and ethnicity. I find that the new programs typically increase the attendance probability of college-age youth by five to seven percentage points. The merit programs also shift students toward four-year schools and away from two-year schools. Surprisingly, the Georgia HOPE Scholarship, which widened racial gaps in college attendance (Dynarski, 2000) is found to be atypical in its distributional impact. The other states’ merit aid programs have actually closed racial and ethnic gaps in attendance. I attribute the Georgia program’s unique distributional effect to its relatively stringent academic requirements and a recently-eliminated provision that channeled the most generous scholarships to higher-income students. * Andrea Corso, Vanessa Lacoss-Hurd, Maya Smith and, especially, Betsy Kent provided excellent research assistance. Support from the Kennedy School of Government, the Milton Fund and the NBER Non-Profit Fellowship is gratefully acknowledged.