The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise

Timothy Bartik (), Brad J. Hershbein () and Marta Lachowska
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Brad J. Hershbein: W.E. Upjohn Institute for Employment Research, http://www.upjohn.org/about-us/who-we-are/research-staff/brad-j-hershbein

No 16-252, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

Abstract: As the costs of higher education rise, many communities have begun to adopt their own financial aid strategy: place-based scholarships for students graduating from the local school district. Some place-based scholarships impose merit- and/or need-based restrictions, while others require little more than residency and graduation. In this paper, we examine the reach and cost-effectiveness of the Kalamazoo Promise, one of the more universal and more generous place-based scholarships. Building upon estimates of the program’s heterogeneous effects on degree attainment, individual-level scholarship cost data, and projections of future earning profiles by education, we examine the Promise’s benefit-cost ratios for different types of students differentiated by income, race, and gender. Although the average break-even rate of return of the program is about 11 percent, rates of return vary greatly by group. The Promise has high returns for both low-income and non-low-income groups, for nonwhites, and for women, while benefit assumptions matter more for whites and men. Our results show that universal scholarships can reach many students and have a high rate of return, particularly for places with a high percentage of African American students.

Keywords: place-based scholarship; enrollment; college completion; natural experiment; difference-in-differences; financial aid policy; benefit-cost analysis (search for similar items in EconPapers)
JEL-codes: I21 I22 I24 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-edu and nep-lma
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Citations: View citations in EconPapers (3)

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Journal Article: The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise (2016)
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