New Financial Aid Programs Increase College Attendance But Widen Racial Gap
March 16, 2001
New state and federal programs have been developed recently to increase college attendance. Among these programs are the federal Lifetime Learning Credit and the Hope Scholarship (Helping Outstanding Students Educationally), and numerous state pre-tax college savings plans. The effect of these new programs has been to raise overall college attendance but widen the attendance gap between blacks and whites and between low- and high-income families.
- Tax incentive savings programs and the Lifetime Learning Credit, which offers $1,500 in tax benefits, do not benefit those families who are too poor to pay taxes, and are therefore more attractive to those in higher marginal tax brackets.
- An evaluation of the Georgia HOPE program (a scholarship paying public college tuition for state residents who maintain at least a B average in high school and college) found that while it increased overall college attendance by 11 percent, the increase was primarily in white students.
- Low-income students appeared to receive no net benefit because the HOPE grants reduced available money for other programs providing need-based aid.
Source: David R. Francis, "Hope Program Increases College Attendance, but also Widens Racial Gap," NBER Digest, December 2000; based on Susan Dynarski "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Paper No. 7756, June 2000, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, Mass. 02138.
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