An Assessment of “HOPE-Style” Merit Scholarships

1. An Assessment of “HOPE-Style” Merit Scholarships Christopher M. Cornwell David B. Mustard University of Georgia University of Georgia Institute of Higher Education September 2012

2. 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?

3. 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

4. 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?

5. Identification with DD

6. Example

7. Our Work on Merit Aid Background Findings Financing Merit Aid Enrollments Stratification Academic Achievement

8. 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

9. 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)

10. 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

11. 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

12. 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

13. Georgia’s HOPE Program

14. Georgia’s HOPE Program

15. Assessing HOPE • Financing Merit Aid • Enrollments • Effect on Georgia institutions • Effect on “brain drain” • College stratification • Academic achievement • College GPA • Course loads • Course and major selection • But do they stay?

16. 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)

17. 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

18. 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

19. 1. Financing Merit Aid

20. 1. Financing Merit Aid

21. 1. Financing Merit Aid

22. 1. Financing Merit Aid

23. 1. Financing Merit Aid

24. 2. Enrollments Percentage Increases in Freshmen Enrollments Attributable to HOPE By Institution Type and Race, 1988-97

25. 2. Enrollments HOPE Effects on Student Migration Numbers of Recent Freshmen in 4-Year Schools By Residency and Destination, 1988, 92, 94, 96

26. 3. College Stratification

27. 3. College Stratification

28. 3. College Stratification Effects of HOPE on SAT Scores and Class Rank By Institution Type, 1989-2001

29. 3. College Stratification Effects of HOPE on Acceptance and Yield Rates By Institution Type, 1989-2001

30. 4. Academic Achievement Cumulative UGA Freshmen GPA Distributions Residents vs Non-Residents

31. 4. Academic Achievement UGA Freshmen, by Residency and HOPE Status

32. 4. Academic Achievement Percentage of Freshmen Completing a Full Load Resident vs Non-Residents

33. 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

34. 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

35. More on HOPE http://www.terry.uga.edu/hope/