Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance

Abstract

The federal government and the states have recently enacted a slew of aid policies aimed at college students from middle- and high-income families. I estimate the impact of aid on the col- lege attendance of middle- and upper-income youth by evaluating Georgia's HOPE Scholarship, the inspiration of the new federal Hope Scholarship. The results suggest that Georgia's program has had a surprisingly large impact on the college attendance rate of middle- and high-income youth. Using a set of nearby states as a control group, I find that Georgia's program has likely increased the college attendance rate of all 18- to 19-year-olds by 7.0 to 7.9 percentage points. The results suggest that each $1,000 in aid ($1998) increased the college attendance rate in Georgia by 3.7 to 4.2 percentage points. Due to key differences between the federal and Georgia programs, these estimates should be treated as a gen- erous upper bound on the predicted effect of the federal Hope Schol- arship. Further, the evidence suggests that Georgia's program has widened the gap in college attendance between blacks and whites and between those from low- and high-income families. The federal Hope Scholarship, should it have its intended effect on middle- and upper-income attendance, will also widen already large racial and income gaps in college attendance in the U.S.