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College Choices: The Economics of Where to Go, When to Go, and How to Pay For It

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  • Political Science

Abstract

The New Merit Aid This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It Volume Author/Editor: Caroline M. Hoxby, editor Volume Publisher: University of Chicago Press Volume ISBN: 0-226-35535-7 Volume URL: http://www.nber.org/books/hoxb04-1 Conference Date: August 13-15, 2002 Publication Date: September 2004 Title: The New Merit Aid Author: Susan Dynarski URL: http://www.nber.org/chapters/c10098 63 2.1 Introduction Merit aid, a discount to college costs contingent upon academic per- formance, is nothing new. Colleges and private organizations have long rewarded high-achieving, college-bound high school students with schol- arships. For example, the privately funded National Merit Scholarship program, established in 1955, annually awards grants to 8,000 entering col- lege freshmen who perform exceptionally on a standardized test. Private colleges have long used merit scholarships to lure students with strong aca- demic credentials. While merit aid has a long history in the private sector, it has not played a major role in the public sector. Historically, government subsidies to col- lege students have not been merit based. At the federal level, aid has been need based and strongly focused on low-income students. Eligibility for the two largest federal aid programs, the Pell Grant and Stafford Loan, is de- termined by a complex formula that defines financial need on the basis of income, assets, and family size. The formula is quite progressive: 90 percent of dependent students who receive federal grants grew up in families with incomes less than $40,000.1 At the state level, subsidies for college students have historically taken the form of low tuition at public college and universities. Most states have 2 The New Merit Aid Susan Dynarski Susan Dynarski is Assistant Professor of Public Policy at the John F. Kennedy School o

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