Long, Bridget Terry. 2004. "How Do Financial Aid Policies Affect Colleges? The Institutional Impact of the Georgia HOPE Scholarship." Journal of Human Resources 39(4): 1045-1066.

This paper examines the effects of financial aid policies on the behavior of post-secondary institutions. Using the introduction of the Georgia HOPE Scholarship as a natural experiment, it investigates the impact of the policy on college pricing, institution aid, expenditures, and state appropriations. The results suggest that four-year colleges in Georgia, particularly private institutions, did respond by increasing student charges. In the most extreme case, colleges recouped approximately 30 percent of the scholarship award. As a result, the institutional responses reduced the intended benefit of the scholarship and increased the cost of college for nonrecipients.

Bridget Terry Long is an assistant professor of economics at the Harvard University Graduate School of Education and a faculty research fellow of the National Bureau of Economic Research. The author gratefully acknowledges support from the National Association of Student Financial Aid Administrators through the Sponsored Research Grant Program. Richard Murnane, Susan Dynarski, David Mustard, Chris Cornwell, and Don Heller offered valuable comments and suggestions. Michal Kurlaender and Adrian Wall provided excellent research assistance. The data used in this article can be obtained May 2005 through April 2008 from Bridget Long, Harvard Graduate School of Education, Gutman Library 465, Cambridge, MA 02138.