Cal Grant, GPA Threshold

Hendren and Sprung-Keyser (2020) calculate net costs by starting with $4,311 in initial program costs. During the late 1990s, when the students analyzed by Bettinger et al. (2019) were enrolled, the grant was worth between $1,500 and $3,500 for students enrolled in four-year public colleges and between $9,000 and $9,700 for students enrolled at private colleges.

Next, Hendren and Sprung-Keyser (2020) account for the additional costs due to increased educational attainment on the part of those eligible for Cal Grant. Hendren and Sprung-Keyser (2020) use estimates from Bettinger et al. (2019) on the number of additional bachelor’s degrees received by Cal Grant recipients and translate that into a fixed number of years of additional schooling, which they assume to be two in their baseline approach. They also use estimates from Bettinger et al. 2019 on the number of individuals who switch between four-year public institutions and two-year public institutions. In each case, Hendren and Sprung-Keyser (2020) follow the approach of Zimmerman (2014), and calculate government costs per full time enrollee based on data from the Delta Cost Project. This results in additional government costs of $1,002. Hendren and Sprung-Keyser (2020) also account for the increase in costs as those who would have enrolled in the absence of the Cal Grant are induced to attend more expensive schools. This adds $210 to total costs. Next, Hendren and Sprung-Keyser (2020) account for the changes in taxes paid and transfers received based on the earnings gains calculated in the willingness to pay section. That results in a fiscal externality of -$7,878 and a total net cost of -$2,355. The 95% confidence interval ranges from -$6,048 to $1,387.

Combining these estimates, Hendren and Sprung-Keyser (2020) get an MVPF of \infty, with a 95% confidence interval of [10.72,\infty]

Hendren and Sprung-Keyser (2020) also consider a specification where the Cal Grant is valued at the cost of the transfer rather than based on the change in long-term earnings. This conservative willingness to pay method ignores any effect from increases in earnings. Instead, it applies the envelope theorem to those induced to get more schooling and assumes they are indifferent to the expenditure. All those who do not change their behavior as a result of the scholarship value it as a dollar-for-dollar transfer. The resulting MVPF for this alternate specification is \infty with a 95% confidence interval of [3.15,\infty].