An Assessment of “HOPE-Style” Merit Scholarships

Christopher M. Cornwell David B. MustardUniversity of Georgia

University of GeorgiaInstitute of Higher EducationSeptember 2012

Basic Economics Start with the standard model

People try to do the best they can given the circumstances

People respond to incentives Applied to higher ed

What is the typical student’s objective? What is the state’s or institution’s

objective?

Estimating Policy Effects Structural vs reduced-form

approaches Problem of identification – what is the

relevant counterfactual? Estimating causal effects

Instrumental variables Difference-in-differences Regression discontinuity designs Matching

Understanding Diff-in-Diff Suppose after HOPE is implemented,

the enrollment rate in Georgia increases. Can we say that HOPE increased the enrollment rate?

Suppose enrollment rates in Georgia are higher than in other neighboring states in the period after HOPE. Can we say that HOPE increased the enrollment rate?

Identification with DD

Example

Our Work on Merit Aid

Background

Findings Financing Merit Aid Enrollments Stratification Academic Achievement

Background Growth of large-scale, state merit aid Georgia’s HOPE Scholarship as the model Common features

Entitlement – based on high-school GPA (and sometimes test scores)

No limit on # of award winners Scholars are eligible for multiple years

Common justifications Increase enrollments in state universities Keep the best and brightest in state Promote academic achievement

Large-scale State Merit Programs Arkansas Academic Challenge (1991) Georgia’s HOPE (1993) Florida Bright Futures (1997) New Mexico Success (1997) Louisiana Tops (1998) South Carolina Life (1998) Kentucky Ed. Excellence Sch. (1999) U. of Alaska Scholars Program (1999) Washington Promise (1999) Maryland HOPE (2000) Nevada Millennium (2000) West Virginia Promise (2002) Tennessee HOPE (2004) Massachusetts Adams Scholarship (2005) Wyoming Hathaway (2006)

Georgia’s HOPE Program HOPE – Helping Outstanding Pupils

Educationally Introduced in 1993 and funded by a state

lottery Almost $3.6 billion disbursed to over

900,000 students Two types of aid:

Scholarship – merit-based; for degree-seeking students

Grant – not based on merit; for certificate and diploma seekers

Georgia’s HOPE Program Scholarship awards

Public schools – full tuition and fees + $300 book allowance

Private schools – $3,000 voucher Eligibility and retention

‘B’ average in HS core courses 3.0 in college, checked at systematic

intervals

Georgia’s HOPE Program Significant program changes

Income cap relaxed in 1994 and eliminated in 1995

Expanded to include non-traditional students (1996), home-schoolers (1998)

“Add-on” scholarships (late 1990s) Removal of Pell offset (2001)

Growing concern that expenditures will outstrip lottery revenue

Georgia’s HOPE Program

Georgia’s HOPE Program

Assessing HOPE1. Financing Merit Aid2. Enrollments

a. Effect on Georgia institutionsb. Effect on “brain drain”

3. College stratification4. Academic achievement

a. College GPAb. Course loadsc. Course and major selection

5. But do they stay?

1. Financing Merit Aid Methods of financing

Lottery (Georgia, Florida, Kentucky, New Mexico, South Carolina, Tennessee)

General revenue (Arkansas, Louisiana, Washington)

Tobacco settlement (Michigan) Video gambling (West Virginia) Interest on land leases and sales (Alaska)

1. Financing Merit Aid

What is the annual per capita spending of adults on the Georgia lottery?

What is the annual per capita spending of people at this meeting?

73.6% of Georgia population is > 18 1/3 of adults do not play lottery

1. Financing Merit Aid Sales per capita = $371.39 Sales per > 18 = $503.92 1/3 of adults don’t play, so … Sales per > 18 who play = $752.13

1. Financing Merit Aid

Table 3: Lottery Sales by Income Quintile, 2001 Variable Quintile 1

<18,590 Quintile 2

$18,590-20,000 Quintile 3

$20,000-21,700 Quintile 4

$21,700-24,355 Quintile 5 >$24,355

Lottery Sales Per Capita 330.34 303.89 377.57 325.78 283.42 Avg Per Capita Income 17,178.72 19,251.28 20,871.10 22,701.78 28,404.66 Avg Sales as % of Avg PCI 1.89 1.58 1.81 1.43 1.03 Number of Counties 32 32 31 32 32 Note: All income variables are in real dollars calculated using the Consumer Price Index with 1998 as the base year.

1. Financing Merit Aid

Lottery Sales by Black Population Quintile, 2001 Variable Quintile 1

< 10.8% Quintile 2

10.8-23.4% Quintile 3

23.4-31.0% Quintile 4

31.0-43.715% Quintile 5 >43.715%

Lottery Sales Per Capita 265.15 251.12 298.51 346.20 457.55 Avg Per Capita Income 22,418.97 23,115.69 20,728.42 20,574.47 21,565.53 Avg Sales as % of Avg PCI 1.20 1.14 1.44 1.70 2.24 Number of Counties 32 32 31 32 32

1. Financing Merit Aid

1. Financing Merit Aid

1. Financing Merit Aid

2. Enrollments

Group Overall4-Year Publics

4-Year Privates

2-Year Publics

2-Year Publics + Techs

All 5.9 9.0 13.0 ns ns

Whites 3.6 4.4 9.2 ns ns

Blacks 15.8 26.0 16.8 ns 11.6

Percentage Increases in Freshmen EnrollmentsAttributable to HOPE

By Institution Type and Race, 1988-97

2. Enrollments

Students in State

Residents in College Stayers

Out-of-Staters Leavers

Number 1216 280 840 376 -560

t-ratio 1.44 0.41 1.39 1.28 3.09Out-of-State effect = Students in State – StayersLeavers effect = Residents in College – Stayers

HOPE Effects on Student MigrationNumbers of Recent Freshmen in 4-Year SchoolsBy Residency and Destination, 1988, 92, 94, 96

3. College Stratification

3. College Stratification

3. College Stratification

Quality Measure All University Comprehensive 4-YearMean SATM 6.2 9.4 ns nsMeanSATV 4.9 14.3 6.9 nsSATM sd ns -2.2 ns nsSATV sd ns -3.5 ns 1.8Top 10% ns 7.6 1.7 ns

Effects of HOPE on SAT Scores and Class RankBy Institution Type, 1989-2001

3. College Stratification

Quality Measure All University Comprehensive 4-YearAcceptance Rate -7.5 -8.4 -3.6 -9.9

Yield Rate ns 4.1 ns 3.5

Effects of HOPE on Acceptance and Yield RatesBy Institution Type, 1989-2001

4. Academic AchievementCumulative UGA Freshmen GPA Distributions

Residents vs Non-Residents

4. Academic AchievementUGA Freshmen, by Residency and HOPE Status

4. Academic AchievementPercentage of Freshmen Completing a Full Load

Resident vs Non-Residents

4. Academic Achievement Course-Load Effects at UGA

5.1% drop in full-load enrollment rate 16.1% rise in withdrawal rate 9.3% drop in full-load completion rate 3100 fewer courses taken Effects concentrated among students

predicted to be on or below the retention margin

63% increase in summer-school course-taking in 1st summer; 44% in 2nd

4. Academic Achievement Core-Course Selection at UGA

.63 credit (6%) drop in Math and Science credits in 1st year

1.2 credit drop over first two years Consistent with substitution away from courses

that have low expected GPAs Major Selection at UGA

1.2 pct point increase in probability of declaring an Education major (~ 50 students)

Effect stronger among women 1.7 pct point decrease in probability of declaring

a Business major

More on HOPE

http://www.terry.uga.edu/hope/