A piece of scholarly literature authored by University of Georgia economics professors Dr. Christopher Cornwell and Dr. David B. Mustard, titled “Merit-Based College Scholarships and Car Sales,” has informed an ongoing debate on the purpose and usefulness of lottery-funded, merit-based scholarships.
Published in Education Finance and Policy in 2007, the study concluded that the introduction of Georgia’s HOPE (Helping Outstanding Pupils Educationally) Scholarships largely benefited affluent families who, in some cases, purchased automobiles for their college students as incentives for them to attend state universities instead of expensive out-of-state institutions. Most of the money flowing into the lottery, however, comes from lower-income people.
Cornwell elaborates, “The typical lottery player is less well-educated and lower income. Merit-based scholarships that are funded by lotteries farm money from people in the bottom half of the income distribution and send those resources to people in the top half of the income distribution.” He adds, however, “In Georgia, to be fair, the lottery also funds universal Pre-K.” Some other states, including North Carolina and Tennessee, also fund Pre-K education in addition to college scholarships with lottery revenue.
Cornwell adds that, even when lottery proceeds are used to fund scholarships, “vehicles aren’t the only things it could be capitalized into. There are sometimes academic things—studying abroad, for example. But some of it got capitalized into car sales, and we presented some evidence to show that was occurring.”
“I thought it was an urban myth at first,” says Mike O’Grady, founder of Higher Education Resource Executives. “I heard people joking about ‘HOPEmobiles’ in the UGA parking lot—the cars people were buying for their kids because of HOPE money. Then I read the (Cornwell and Mustard) study, and I realized it wasn’t a joke.”
It is important to note that state lottery-funded scholarships such as Georgia’s HOPE program are different and separate from the federal Hope tax credit, now known as the American Opportunity Tax Credit. The AOTC allows eligible households to subtract some of the cost of tuition, materials and fees from their taxable income to help defray the cost of higher education.
