Does Broad-Based Merit Aid Improve College Completion? Evidence from New Mexico's Lottery Scholarship

We use the natural experiment of a state lottery scholarship to measure the effect of generous financial aid on graduation rates at New Mexico's flagship public university. During the study period, the scholarship program paid full tuition for eight semesters for any state resident earning a 2.5 grade point average in their first semester at any public two-year or four-year college. We find a significant positive completion effect of 10 percentage points (17.9 percent) for academically well-prepared students that is offset by a large negative effect of 11.6 percentage points (38.8 percent) for less-prepared students. We posit that the scholarship program, which effectively erased the difference in tuition at two- and four-year colleges, may have induced weaker students to take their chances on a more prestigious, yet riskier, academic path.

The Arkansas Lottery Scholarship Act

State lottery policies have been created to generate additional funds to support public initiatives, such as higher education scholarships. Through 18 participant interviews and document analysis, this study examined how decision makers in Arkansas socially constructed citizens while forming lottery policy. The social construction of target populations theory provides a framework for better understanding how social constructions became embedded into the policy design process. Participants noted that beneficiaries included higher education students and the retail and vendor community. In addition, discussion centered on burdens being placed on people who derive from low income and people who have gambling addiction.