Over the past decade, aid for post-secondary schooling has become increasingly tied to merit. During this period, a number of state governments have committed millions of dollars to merit aid, in most cases dropping means tests entirely. The model for these state actions has been Georgia's HOPE ("Helping Outstanding Pupils Educationally") Scholarship. Introduced in 1993, the HOPE Scholarship covers tuition, fees, and book expenses for students attending Georgia public colleges, and provides a subsidy of comparable value to students attending in-state private colleges, without any income restrictions. Since its inception, more than $1.2 billion of HOPE scholarship aid has been distributed to over 525,000 students. The relative price changes induced by HOPE-style aid influence several important enrollment decisions: in-state versus out-of-state, 2-year versus 4-year, labor-market versus 2-year (or 4-year). Student movements along these margins raise important questions about the effects of merit aid on student sorting. This study will examine the degree to which programs like HOPE lead to college stratification by ability race and gender.
Individual sorting is a pervasive fact of life. Resources early in life determine in large part the level and quality of a person's postsecondary education. From the perspective of sorting, parental resources determine where you live and where begin your schooling, which enhance a child's college prospects. A college degree, in turn, improves labor and marriage market opportunities. Thus, to the extent merit is correlated with household income, programs like the HOPE Scholarship reinforce the effects of sorting patterns established prior to the college enrollment decision.