Paying for Performance: The Education Impacts of a Community College Scholarship Program for Low-Income Adults

We evaluate the effect of performance-based incentive programs on educational outcomes for community college students from a random assignment experiment at three campuses. Incentive payments over two semesters were tied to meeting two conditions¿enrolling at least half time and maintaining a ¿C¿ or better grade point average. Eligibility increased the likelihood of enrolling in the second semester after random assignment and total number of credits earned. Over two years, program group students completed nearly 40 percent more credits. We find little evidence that program eligibility changed types of courses taken but some evidence of increased academic performance and effort

The Nature of Credit Constraints and Human Capital

We develop a human capital model with borrowing constraints explicitly derived from government student loan (GSL) programs and private lending under limited commitment. The model helps explain the persistent strong positive correlation between ability and schooling in the United States, as well as the rising importance of family income for college attendance. It also explains the increasing share of undergraduates borrowing the GSL maximum and the rise in student borrowing from private lenders. Our framework offers new insights regarding the interaction of government and private lending, as well as the responsiveness of private credit to economic and policy changes. (JEL D14, H52, I22, I23, J24)