Considerable gains from grants that target low-income college students

This study estimates the effect of grant aid on poor college students' attainment and earnings using student-level administrative data from four-year public colleges in Texas. To identify these effects, the authors exploit a discontinuity in grant generosity as a function of family income.  Eligibility for the maximum Pell Grant significantly increases degree receipt and earnings beginning four years after entry. Within ten years, imputed taxes on eligible students' earnings gains fully recoup total government expenditures generated by initial eligibility.