Is merit-aid for all? The effects of aid-eligibility changes on college access in the United States

Abstract

ABSTRACTThe United States has widely experimented with merit-based financial aid to make college more accessible and affordable for its youth. Varying in design and benefits, these state-run programs subsidize college costs for academically meritorious high-school graduates. While broadly linked to higher college attendance the distribution of aid benefits depends critically on the eligibility criteria. States often make post-adoption changes to merit requirements to lower program costs, but little is known about their impact on youth’s college decisions. This paper evaluates the effects of such eligibility revisions using West Virginia’s PROMISE scholarship, which, unlike its peers, frequently hardened merit rules post-inception. We leverage the discontinuities in the timing of the scholarship’s adoption and its successive modifications to estimate the policy-induced changes in students’ college choice. We use two robust inference models – difference-in-difference and synthetic control, on institution-level enrollment data from the Integrated Postsecondary Education Data Systems (IPEDS). We estimate a 6.5% growth in college enrollments immediately following PROMISE that fades rapidly once aid eligibility narrows. We find that this initial enrollment jump is attributable to an aid-induced improvement in the average youth’s college readiness which is confined to the high achievers after the program scope narrows. Additionally, enrollments shift from 4-year to 2-year colleges post eligibility revisions. Our results show that the stiffer criteria redirect the aid benefits toward youth with already better access to college.