Social Security Student Benefit Program

The treatment in this case is the receipt of the Social Security benefit, so the initial program costs are $6,700 for each recipient. Hendren and Sprung-Keyser (2020) scale that cost by the number of years of benefit take-up and the fraction of individuals eligible for the scholarship. That produces a program cost of $11,485. Next, Hendren and Sprung-Keyser (2020) account for the additional costs due to increased educational attainment on the part of those eligible for the benefit. They use estimates from Dynarski (2003) on the additional years of educational attainment. They calculate government costs per full time enrollee based on data from the Delta Cost Project. 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 $6,686 and, when combined with the educational expenditures, a total net cost of $7175.

Combining these estimates, Hendren and Sprung-Keyser (2020) get an MVPF of 4.86 with a 95% confidence interval of [0.98,52.39].

Hendren and Sprung-Keyser (2020) also consider alternate approaches to calculating the earnings effect, allowing for aid crowding out effects, specifying the amount of benefits, and determining willingness to pay. In the case of the earnings effect, they create a specification where their earnings projections are not based on years of school completed, but rather initial college enrollment. In this case, they assume that initial enrollment results in two additional years of schooling. Hendren and Sprung-Keyser (2020) then apply the same earnings projection method from Zimmerman (2014) using these schooling increases. That specification results in an MVPF of 4.87 with a 95% confidence interval of [1.16,32.23]. As an alternative specification, Hendren and Sprung-Keyser (2020) assume that the absence of the Social Security Student Benefit leads students to seek other forms of government aid. They make the conservative assumption that all students would have been awarded Pell grants, so the baseline program cost is the benefit amount net of this other form of aid. This gives an MVPF of 6.42 with a 95% confidence interval of [0.94,\infty]. They also consider a specification in which students receive only partial benefits in the amount of $4,700, giving an MVPF of 8.75with a 95% confidence interval of [0.97,\infty]. In the case of willingness to pay, Hendren and Sprung-Keyser (2020) also considered a specification where the Social Security Student Benefit 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. Individuals 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 1.45 with a 95% confidence interval of [0.97,2.23].