Author: Sam Fahmy
Contact: David B. Mustard
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Published

ATHENS, Ga. — A new study by economists at the University of Georgia Terry College of Business reveals that the lottery-funded HOPE Scholarship has increased enrollment at the state's colleges and universities, but its greatest effect has been on the decision of where - rather than whether - to attend college.

The study, published in the October issue of the Journal of Labor Economics, also found that the scholarship reduced the number of Georgia students attending out-of-state institutions, has made Georgia institutions more competitive by increasing SAT scores of incoming freshman and has increased the number of students attending historically black colleges and universities (HBCUs).

"Before HOPE, only a small fraction of college financial aid was allocated on the basis of merit and most of it by individual institutions," said study co-author Christopher Cornwell, professor of economics. "But in the last decade state governments have established a range of large-scale merit scholarships, most of which have no means tests. Almost invariably the model for these initiatives is Georgia's HOPE Scholarship."

Cornwell, along with associate professor David Mustard and former doctoral student Deepa Sridhar, compared enrollments at Georgia institutions with other states in the 16-member Southern Regional Educational Board. They found that between 1988 and 1997, the period immediately before and after the HOPE scholarship was implemented, freshman enrollment increased by 2,889 students per year, or 15 percent. Viewed another way, however, 85 percent of HOPE recipients would have gone to college even without the scholarship.

"There have been thousands of HOPE recipients since the program's inception, but most of them - the data suggest - were going to go to college anyway," Cornwell said.

When Georgia implemented the HOPE Scholarship in 1993, one of its goals was to increase retention of the state's best students. The researchers found that the scholarship reduced the number of students leaving Georgia to attend college elsewhere by 560 students per year. Freshman SAT scores, a measure of student quality, increased by nearly 40 points statewide after HOPE was implemented, the study found.

"Obviously we're getting better in-state students, but we're also getting better out-of-state students," Mustard said. "The qualifications of both in-state and out-of-state students are going up at about the same rate."

The study also examined the effect of HOPE on enrollment at historically black colleges and universities. The researchers note that before HOPE was implemented, many black students from Georgia attended out-of-state HBCUs. HOPE gave those students an incentive to stay in Georgia, resulting in a drop in enrollment at out-of-state HBCUs. Between 1992 and 1994, the researchers found, enrollment of students from Georgia at the five most popular out-of-state HBCUs - Florida AandM, Alabama State, Tuskegee University, Alabama AandM and Hampton University - dropped 34 percent.

Mustard emphasized that the study found that HOPE influences the choice of where to attend college, but doesn't appear to significantly increase access to college.

"It's not so much inducing a lot of new college going," Mustard said, "but rather moving people around."

The researchers chose the years 1988 to 1997 so that they could study the period immediately before and after the scholarship was implemented. In the late 1990s, neighboring states began introducing similar scholarship programs, making comparison for those years difficult.

Florida implemented a HOPE-like scholarship program in 1997, South Carolina and Louisiana began offering full-tuition, merit-based scholarships in 1998 and West Virginia in 2002. Mississippi and Kentucky began offering limited merit-based scholarships in 1996 and 1999, respectively. Most recently, Tennessee implemented a limited merit-based scholarship in 2004.

Cornwell said the proliferation of HOPE-like scholarships means that the benefits created by Georgia's program will likely become muted, with states engaging in an "arms race" to retain their best students.