City University of New York Pell Grants

The treatment in this case is eligibility for the Pell Grant, and the initial program costs are normalized to $1,000 for the sake of the analysis. Next, Hendren and Sprung-Keyser (2020) account for the additional costs due to increased educational attainment on the part of those eligible for Pell aid. Hendren and Sprung-Keyser (2020) use estimates from Marx and Turner (2018) on the additional years of educational attainment. They calculate government costs per full time enrollee based on data from the Delta Cost Project. This increases costs by $133. 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 $117 and a total net cost of $1,016.

Combining the WTP and net cost estimates yields an MVPF of 1.39, with a 95% confidence interval of [-2.95, 12.88].

Hendren and Sprung-Keyser (2020)] also consider alternate approaches to calculating the earnings effect and determining willingness to pay. In the case of the earnings effect, they create a specification where their earnings projections are not based on credits completed but rather on initial enrollment and student re-enrollment. Hendren and Sprung-Keyser (2020) assume that these represent distinct groups of recipients and translate each outcome into an increase in years of schooling. They assume that initial enrollment results in two additional years of schooling, while re-enrollment results in one additional year. Hendren and Sprung-Keyser (2020) then apply the same earnings projection method from Zimmerman (2014) using these schooling increases. The resulting MVPF for this alternate specification is 2.60 with a 95% confidence interval of [-1.30,49.87]. Hendren and Sprung-Keyser (2020) also consider a specification where the Pell Grant is valued at the cost of the transfer rather than based on the change in long-term earnings. This conservative method for calculating willingness to pay 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 0.98 with a 95% confidence interval of [0.54,1.52].