Performance-based scholarships have two main goals: to give students more money for college and to provide incentives for academic progress. They are designed to reduce the financial burden on low-income students and help them progress academically by offering financial aid contingent upon meeting pre-specified academic benchmarks. The scholarships are intended to cover a modest amount of students’ educational costs during the semesters they are offered — generally between 15 and 25 percent of students’ unmet financial need, the difference between students’ calculated financial need to attend college and the financial aid they are awarded. The money is paid directly to students, on top of their existing federal and state need-based financial aid, and the students themselves decide how best to use the funds.

MDRC launched the Performance-Based Scholarship Demonstration in 2008 to evaluate the effectiveness of these scholarships for as broad a range of low-income students as possible, in a variety of settings, and with varying incentive structures. As such, the evaluation includes more than 12,000 students in institutions across six states to test different performance-based scholarship designs. Each program was developed for a different population of students and had a different scholarship structure; the scholarship amounts ranged from a few hundred dollars to $1,500 per term, depending in part on the benchmarks being tested. Institutions created performance-based scholarship programs tailored to what they perceived to be the specific needs of their students, by targeting the incentive, academic benchmarks, and in some cases additional services to address those needs.

Each of the six programs in the demonstration was evaluated using a randomized controlled trial — the highest standard of evidence for evaluation research. Students were randomly assigned by researchers either to receive only their usual financial aid package and services or to be eligible to receive supplemental financial aid and services in the form of a performance-based scholarship, contingent upon meeting the given academic benchmarks.

The results show that these scholarships improved students’ academic progress during the program — effects that remained evident several years after the program ended. The effects on students’ academic progress appear generally consistent across the different programs and student subgroups. In addition, one program targeted high school seniors and succeeded in increasing their matriculation in college, and three of the programs reduced students’ dependency on loans. Most important, this evaluation finds that the programs modestly increased degree completion, measured after five years.

These results show that even relatively moderate investments in low-income students’ education can have modest but long-lasting impacts on their academic outcomes. These findings may be especially relevant to states, institutions, and private scholarship providers seeking purposeful and efficient ways to give low-income students additional financial aid that can also help them succeed academically.