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Merit Aid

By Chris | November 9, 2007

Recently, I had the opportunity to attend a seminar by Joshua Goodman on “Who Merits Financial Aid?  Massachusetts’ Adams Scholarship”.  It was a refreshing surprise given  the dull seminars I had attended earlier in the year.  Goodman, a job market candidate at Columbia, analyzed the effects of a scholarship program in Massachusetts that awards students who meet certain benchmarks on a standardized test the equivalent of 1600 dollars in aid if they attend college in-state.  Goodman concludes:

“In sum, the Adams Scholarship will spend $30 million annually to leave college atten-
dance rates unchanged while paying 85% of recipients to attend the college they would
have chosen anyway and the remaining 15% to attend colleges in the public sector rather than the private sector. This is not a sensible use of the state budget.”

Personally, the existence of in-state scholarships was a major reason I decided to attend an in-state university as an undergraduate.  I agree with Goodman that it is irrational to spend lots of money to encourage a few students to attend school in-state.  However, I disagree that we should focus on more need-based assistance.  Merit based scholarships provide an incentive for high school students to work hard.  I knew too many students in high school who gamed the financial aid system.  Furthermore, I think that need-based aid creates perverse incentives for families when it comes to saving for education.  More on this later.

This weekend I’ll be out of state at another Ultimate Frisbee tournament.  I’ll be back posting on Sunday or Monday.

Topics: Economics, Education | No Comments »

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