The Effects of Financial Aid Loss on Persistence and Graduation: A Multi-Dimensional Regression Discontinuity Approach

For years Georgia's HOPE Scholarship program provided full tuition scholarships to high achieving students. State budgetary shortfalls reduced its generosity in 2011. Under the new rules, only students meeting more rigorous merit-based criteria would retain the original scholarship covering full tuition, now called Zell Miller, with other students seeing aid reductions of approximately 15 percent. We exploit the fact that two of the criteria were high school GPA and SAT/ACT score, which students could not manipulate when the change took place. We compare already-enrolled students just above and below these cutoffs, making use of advances in multi-dimensional regression discontinuity, to estimate effects of partial aid loss. We show that, after the changes, aid flowed disproportionately to wealthier students, and find no evidence that the financial aid reduction affected persistence or graduation for these students. The results suggest that high-achieving students, particularly those already in college, may be less price sensitive than their peers.

Tax Benefits For Education

The past eight years have been a time of great change in the tax treatment of higher education expenses. The Taxpayer Relief Act of 1997 started this process with the creation of the HOPE Scholarship and Lifetime Learning Credits. The subsequent Economic Growth and Tax Relief Reconciliation Act of 2001 expanded these incentives, but these provisions will terminate at the end of 2010 unless new legislation extends them. This article provides an overview of determining eligibility for education credits and computation thereof, discussion of the deductibility of student loan interest, eligibility for tuition and fees deduction, and comparison of credits versus deductions in terms of which one is more beneficial to a particular taxpayer.

Tax Benefits For Education Part Two

<p class="MsoNormal" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">The past ten years have been a time of great change in the tax treatment of education expenses.<span style="mso-spacerun: yes;">&nbsp; </span>Part I of this research covered the HOPE Scholarship, Lifetime Learning Credits, deductibility of student loan interest, eligibility for tuition deduction, and comparison of credits versus deductions.<span style="mso-spacerun: yes;">&nbsp; </span>This article (Part II) provides an overview of Qualified Tuition Programs which are referred to as Sec. 529 plans.<span style="mso-spacerun: yes;">&nbsp; </span>These plans were authorized by Congress in 1996 and expanded in 2001.<span style="mso-spacerun: yes;">&nbsp; </span>These tax-advantaged savings benefits were set to expire on December 31, 2010. However, Section 1304 in title XIII of the Pension Protection Act of 2006 approved by Congress permanently eliminated the &ldquo;sunset&rdquo; provision, thereby making Section 529 plans permanent. This article provides an overview of Section 529 plans as well as Coverdell Education Savings Accounts which are, in essence, IRAs established exclusively for the purpose of paying qualified educational expenses.</span></span></p>

Merit-Based College Scholarships and Car Sales

Since the early 1990s, state governments have distributed billions of dollars in financial aid through merit-based college scholarships, most of which have no means tests. The model for most of these programs is Georgia's Helping Outstanding Pupils Educationally (HOPE) scholarship. Given the high correlation between precollege academic achievement and family income, the program characteristics raise the question: to what extent are HOPE disbursements simply rent payments to households otherwise inclined to send their children to college? This article addresses the rent question by examining the effect of HOPE on automobile consumption. The relatively swift passage of the lottery law and establishment of the program created an unanticipated windfall large enough to encourage the financing of consumer durables purchases, such as automobiles, out of household savings targeted for college. First, we compare car registrations in Georgia with those in sets of control group states before and after HOPE. We do not find a statistically significant overall HOPE effect, but allowing the HOPE coefficient to vary by year reveals statistically significant percentage increases in registered vehicles in 1994 and 1995, when the program's income cap was raised and then removed. Next, we examine the relationship between car registrations and HOPE recipients by county. Our results indicate that the number of HOPE recipients attending degree-granting institutions increases car registrations in counties above the 75th percentile in per capita income; there is no evidence of a relationship in counties below the 25th per capita income percentile.