Abstract In contrast to education reform efforts that target teachers and schools, merit‐based financial aid for college increases the incentives for high school students and their families to directly affect the quality of education by investing more time and effort in schoolwork. Large‐scale merit‐based aid programs, such as Georgia's HOPE Scholarship, seek to improve education by encouraging students to meet higher standards, in this case by obtaining a 3.0 grade point average in high school and college. Since the HOPE program began in 1993, the number of high school graduates qualifying for the aid has steadily increased to more than 38,000 graduates in the class of 1998, or 59.5 percent of the graduating class. At the same time, the relationship between grades and achievement has remained consistent or, in some cases, improved since HOPE began. In fact, African–American males and females with a 3.1 high school core course grade point average have increased their average Scholastic Assessment Test (SAT) scores by more than 20 points. This indicates that merit‐based aid has improved the quality of K–12 education in Georgia and reduced racial performance disparities by motivating students and their families to commit greater effort to schooling. © 2002 by the Association for Public Policy Analysis and Management.
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