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Abstract

While most of the literature on the impact of financial aid policy focuses on the reactions of individuals, researchers have long theorized that the policies may also impact the behavior of postsecondary institutions. This paper sheds light on this issue by utilizing the Georgia HOPE Scholarship as a unique natural experiment. The effects on tuition pricing, room and board charge, and institutional financial aid awards are investigated by comparing colleges within Georgia to institutions outside of the state. The results suggest that four-year colleges in Georgia did increase student charges by raising price and reducing institutional aid These actions may have reduced the intended benefit of the HOPE Scholarship for recipients .while also inadvertently increasing prices .for the over 1 0~ 000 non-recipients attending Georgia colleges. However the response is not large enough to suggest that increases in aid explain the substantial growth in tuition prices during the past several decades.

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