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ERIC Number: ED551069
Record Type: Non-Journal
Publication Date: 2004-Sep
Pages: 39
Abstractor: ERIC
Reference Count: 24
The New Merit Aid
Dynarski, Susan
National Bureau of Economic Research
Merit aid, a discount to college costs contingent upon academic performance, is nothing new. Colleges and private organizations have long rewarded high-achieving, college-bound high school students with scholarships. While merit aid has a long history in the private sector, it has not played a major role in the public sector. At the state level, subsidies for college students have historically taken the form of low tuition at public college and universities. Most states have long had "some" form of merit aid, but these programs have traditionally been small and limited to the most elite students. Recently, however, state legislatures have gotten into the business of defining academic merit and awarding merit aid to hundreds of thousands of students. This new breed of merit aid differs from the old style in both its breadth and, plausibly, its effect on students' decisions. The old style of merit aid was aimed at top students, whose decision to attend college is not likely to be contingent upon the receipt of a scholarship. By design, if not by intent, this elite form of merit aid goes to students whose operative decision is not whether to attend college, but which high-quality, four-year college to choose. By contrast, the new, broad-based merit aid programs are open to students with solid although not necessarily exemplary academic records. Such students may be uncertain about whether to go to college at all. When offered a well-publicized, generous scholarship, some of these students may decide to give college a try. Even among students who would have gone to college without the scholarship, the incentives of merit aid may have an effect on schooling decisions. This chapter examines how merit aid affects this array of schooling decisions, using household survey data to measure the impact of the new state programs. The author starts with a case study of the Georgia Helping Outstanding Pupils Educationally (HOPE) Scholarship, the namesake and inspiration of many of the new state programs. She then extends the analysis to other states that now have broad-based, HOPE-like programs and pays particular attention to how the effect of merit aid has varied by race and ethnicity. Merit aid might affect the decisions not only of students but also of institutions. Do colleges increase their tuition prices, in order to capture some of the subsidy? Do they reduce other forms of aid? Does the linkage of scholarships to grades lead to grade inflation at high schools and colleges? A number of studies have addressed these questions, and the author reviews the evidence on these topics. Finally, she briefly discusses the political economy of merit aid. Why has it arisen where it has and when it has? What are the prospects for its continuation and growth, given the current, poor fiscal prospects of the states? The chapter is followed by a commentary from Charles Clotfelter. [This essay was published in: Caroline M. Hoxby, Ed. "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It." University of Chicago Press, September 2004. p63-100. ISBN 0-226-35535-7.]
National Bureau of Economic Research. 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. Tel: 617-588-0343; Web site:
Publication Type: Reports - Research
Education Level: Secondary Education; High Schools; Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: Harvard University, John F. Kennedy School of Government; William F. Milton Fund
Authoring Institution: National Bureau of Economic Research
Identifiers - Location: Georgia