Association for Public Policy Analysis & Management

As the costs of higher education continue to rise, there is considerable policy debate over the effective and efficient use of financial aid, especially at the state and local levels. Many communities have adopted place-based scholarships, generally open to students graduating from a certain school district, but requiring variable conditions be met. In particular, some of these place-based scholarships impose merit- and/or need-based restrictions, while others require little more than residency and graduation. While it is possible (although not certain) that the former are more efficient in raising outcomes per dollar spent, they likely reach fewer students. In this paper, we examine the reach and cost-effectiveness of the Kalamazoo Promise, one of the more universal and more generous place-based scholarships. Building upon estimates of the program's heterogeneous effects on degree attainment, individual-level scholarship cost data, and assumptions about earning profiles by education, we examine cost-benefit ratios for different types of students. Although these ratios vary, the average social internal rate of return exceeds 10 percent. We discuss the implications of our results to the design of place-based scholarships, specifically, and financial aid more generally.