University of Arkansas Office for Education Policy

New Research on Arkansas Challenge Scholarships

In The View from the OEP on February 17, 2021 at 12:30 pm

The Arkansas Academic Challenge Scholarship (ACS) has awarded over 600,000 college scholarships to Arkansas students. ACS is a state-financed merit-aid program with relatively low eligibility requirements, and there is no expectation of repayment. Governor Asa Hutchinson has expressed interest in enhancing ACS funding for students demonstrating a financial need, and results from new research out today highlights the fact that the timing of receiving money may heavily influence student behavior and postsecondary outcomes. Researchers find that receiving ACS funds initially while already in college resulted in small, negative impacts on short-run outcomes such as GPA and credit accumulation, but large statistically significant declines in the likelihood of graduating within four, five, or six years of entering college.

While a version of the ACS dates back to the 1990s, legislation passed in 2008 dramatically expanded the program by tying funding to the Arkansas Scholarship Lottery. Expansion of the Academic Challenge Scholarship allowed some students who were already enrolled in college to become eligible for the scholarship. In the current study, researchers examined how receipt of the scholarship impacted students’ college GPA, credit accumulation and likelihood of graduation. For more details about the research, you can read the full paper, or the shorter policy brief, but we wanted to share the highlights:

  • Overall, students who received the scholarship funds while already enrolled in college earned lower GPAs, accumulated fewer credits, and were over 40 percentage points less likely to graduate in four, five, or six years relative to their peers who did not receive the scholarship.
  • Compared to their peers, students who began receiving funding during their sophomore year of college enrollment:
    • earn lower GPAs and accumulate a staggering 18 fewer credits within the first year of receiving their scholarship
    • earn GPAs, on average, 0.75 points lower, and accumulate 24 fewer credits two years after receiving funding,
    • were 53-62 percentage points less likely to graduate in four, five, or six years.
  • Compared to their peers, students who began receiving funding during their junior year of college enrollment:
    • appear to have few significant changes in their GPA, or credit accumulation after one or two years,
    • experienced no statistically significant change in their likelihood of graduating within four, five, or six years.
  • Compared to their peers, students who began receiving funding during their senior year of college enrollment:
    • experienced small declines in their credit accumulation and GPA,
    • were 54 percentage points more likely to graduate within six years than students who did not receive funding.

It may seem counter-intuitive that receiving scholarship money would have a negative effect, but the research on college merit aid have found mixed effects of such programs on student outcomes. In the only study of randomly assigned aid offers, Angrist and colleagues (2016), find that being assigned to receive merit-aid increases both the probability of enrolling and persisting in college and demonstrates that students with relatively low academic achievement and those who enrolled in less-selective four-year institutions generated the largest gains in both outcomes. However, this same study also indicates that students appear to delay graduation to a fifth year in order to maximize scholarship funding if the program is renewable beyond four years.

We need to continue to research how the ACS funds effect outcomes for Arkansas students, including longer-term workforce outcomes. If the timing of the money matters, awarding the scholarship funds in the most effective way will lead to better outcomes for our students and our state.

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