Association for Public Policy Analysis & Management

In November of 2008, Arkansas voters approved the state’s first lottery with the understanding that proceeds would be used to dramatically expand an existing higher education scholarship program, the Arkansas Academic Challenge Scholarship (ACS). The ACS is a broad-based merit scholarship; requiring first-time freshmen graduating from Arkansas high schools to achieve either a minimum high school GPA of 2.5 or a minimum ACT (or equivalent) score of 19.

Scholarship award amounts have changed over time. In the first year of the ACS expansion, award recipients attending 4-year institutions received $5,000. The award amount for 4-year institutions declined slightly to $4,500 in 2011-12 in response to increased enrollment rates at 4-year institutions. In 2013-14, the funding policy changed dramatically from a constant dollar amount per year to a back-loaded funding policy, with freshmen receiving $2,000, sophomores receiving $3,000, juniors receiving $4,000, and seniors receiving $5,000. The change was justified as incentivizing students to complete their college degree, thereby ensuring the state received its intended return-on-investment. What is unclear, however, is if this has occurred.

While we are interested in the general effects of a broad-based scholarship program on student outcomes in Arkansas, we believe the change to a back-loaded funding scheme presents a novel research opportunity. Specifically, we are interested in answering the question: How did the 2013-14 change to the ACS funding policy affect college enrollment, persistence, and the likelihood of graduating on time (4- and 6-years) for first-time enrollees?

To answer this question, we use Individual-level demographics and college outcome data for all students enrolled in Arkansas 4- and 2-year institutions between 2004 and 2016 and implement a Difference-in-Discontinuities approach (Grembi et al., 2015). We’re primarily interested in estimating the effect of the funding policy change on student outcomes. The DiDD essentially estimates two fuzzy RDDs, one for the cohort of students right before the policy change and one for the first cohort to experience the policy change. The impact of the policy change is estimated as the difference between the two RDD estimates.

Our preliminary results show no evidence of a statistically significant impact of the change in funding structure of the lottery-funded scholarship on students’ persistence of the likelihood of graduating within four years. We do, however, find evidence of a statistically significant positive impact on final observed GPA. We caution, however, that these results are preliminary. Most importantly, final observed GPA is censored for students failing to graduate from college within the time window of our analysis. It is very likely the observed positive effect on GPA is driven largely by students still enrolled in college towards the end of our time window.