AP Exam Fee Waivers for Low-Income Students in North Carolina
Introduction
Advanced Placement (AP) courses offer high school students college-level coursework and the chance to earn college credit. The exam fee ($98 in 2024) is a direct cost of taking the exam, and more than one in four AP enrollees do not take it. The federal government has long subsidized a significant part of the fee for low-income students. Starting in the 2014-15 school year, North Carolina paid the AP exam fee for every public school student enrolled in an AP course, regardless of income or the number of exams taken. In the first year, the state paid the College Board about $10.64 million to cover exam fees for over 65,000 students.
Rahman and Lawson (2026) study how this universal waiver affected exam participation and the share of AP enrollments that result in a passing score. The paper links student-course-level administrative records from North Carolina to College Board AP exam data for the 2010-11 to 2016-17 school years. It excludes 23 lower-performing districts that received a broader bundle of services under the North Carolina Advanced Placement Partnership.
Among students who took AP courses before and after the waiver, the waiver raised exam participation by 2.1 percentage points but did not significantly increase the share of AP enrollments yielding a passing score. The paper finds that the waiver raised the passing share by 3 percentage points for low-income students, narrowing their gap with high-income students by 15 percent.
The paper uses these estimates to calculate the MVPF of AP exam fee waivers for low-income students.
MVPF = 2.1
Net Cost
The net cost to the state is the exam fee it pays, less the additional state income tax revenue generated by the student’s higher lifetime earnings. All values are per low-income AP enrollment, in 2012 dollars, with future earnings discounted at 3 percent.
To match the 2012-dollar earnings estimates used in the willingness to pay, the paper uses the 2012 AP exam fee of $87. For low-income students, it applies the 2025 ratio of the reduced fee to the full fee ($53/$99), which gives a cost of $46.58.
At North Carolina’s flat 3.99 percent income tax rate, the paper credits the state with $3.62 in additional income tax revenue from the student’s higher lifetime earnings.
The net cost to the state is therefore $46.58 – $3.62 = $42.96.
Because the paper measures the net cost to the state, its fiscal externality includes only North Carolina income tax; federal income tax on the earnings gain is not counted. If federal income tax were also counted, at a combined federal and state tax rate of 20 percent, the net cost would be $27.69.
Willingness to Pay
The paper assumes that a student’s willingness to pay for a fee waiver equals the resulting gain in the present value of their lifetime earnings. The gain runs through a causal chain in which the waiver makes a student more likely to pass the AP exam, passing makes them more likely to complete college, and completing college raises their lifetime earnings.
The paper estimates that the waiver increased the share of low-income students’ AP enrollments yielding a passing score by 3.0 percentage points. This estimate comes from low-income students who took multiple AP courses, and the paper assumes it applies to all low-income AP enrollees. Smith, Hurwitz, and Avery (2017) estimate that passing an AP exam raises the probability of on-time (four-year) college completion by 1.0 percentage point. Bartik, Hershbein, and Lachowska (2016) estimate that college completion raises the present value of low-SES students’ lifetime earnings by $314,800 (in 2012 dollars, for earnings from ages 25 to 79, discounted at 3 percent).
Multiplying these three figures and netting out North Carolina’s 3.99 percent income tax gives a willingness to pay of $90.67 per low-income AP enrollment.
MVPF Summary
The MVPF of AP exam fee waivers for low-income students is therefore $90.67 / $42.96 = 2.11. The paper interprets this as the return to a means-tested policy that waives exam fees only for low-income students.
Counting federal as well as state income tax on the earnings gain, at a combined rate of 20 percent, would lower willingness to pay to $75.55 and the net cost to $27.69, giving an MVPF of 2.73.
The paper also calculates an MVPF for waivers to AP enrollments with a low predicted probability of exam-taking (below the pre-waiver median). For these enrollments, the waiver increased the share yielding a score of 3 or higher by 5.9 percentage points. The paper uses a smaller effect of passing on college completion for this group (0.8 percentage points), because many of these enrollments are in underutilized AP courses, which Smith, Hurwitz, and Avery (2017) find do less to raise on-time college completion. It also weights exam costs and earnings gains by the mix of low- and high-SES students in the group. The resulting MVPF is 5.28. The paper notes that perfectly targeting these enrollments is difficult, as they are not explicitly identified in administrative data.
By construction, low-propensity enrollments make up half the sample, so a universal waiver reaches them about half the time, and the state must fund roughly two waivers for each low-propensity enrollment it reaches. The paper therefore puts the MVPF of the universal waiver at about 5.28 / 2 = 2.64. It concludes that the universal policy is likely more efficient than a means-tested waiver for low-income students.
The paper describes its MVPF calculations as illustrative, resting on strong assumptions that link AP exam scores to later educational and labor-market returns.
References
Bartik, Timothy J., Brad Hershbein, and Marta Lachowska (2016). “The Merits of Universal Scholarships: Benefit-Cost Evidence from the Kalamazoo Promise.” Journal of Benefit-Cost Analysis, 7(3): 400–433. DOI: https://doi.org/10.1017/bca.2016.22
Rahman, Md Twfiqur, and M. Cade Lawson (2026). “Removing barriers to college credits: Where and for whom AP exam fee waivers work.” Economics of Education Review, 115: 102837. DOI: https://doi.org/10.1016/j.econedurev.2026.102837
Smith, Jonathan, Michael Hurwitz, and Christopher Avery (2017). “Giving College Credit Where It Is Due: Advanced Placement Exam Scores and College Outcomes.” Journal of Labor Economics, 35(1): 67–147. DOI: https://doi.org/10.1086/687568
Policy Features
- Category
- Education
- Sub-Category
- Child Education
- Beneficiary Type(s)
- Children and Youth, Secondary school enrollees, Students
- Country of Implementation
- United States
- Year of Implementation
- 2014-15
- Empirical Method
- Difference in Differences
- Research Type
- Primary
- Peer Reviewed
- Yes
- MVPF Publication Link
- doi.org/10.1016/j.econedurev.2026.102837