Maarten De Ridder, Simona Hannon, Damjan Pfajfar, 21 April 2022

An expansion of the federal Pell Grant programme – the largest US scholarship programme that helps lower-income students attend college – has recently been proposed. This column shows that, besides the long-run benefits of making college more affordable, Pell Grants significantly raise local economic activity. Local income rises by 2.4% when Pell Grants increase by 1% of income, far exceeding the effect of, for example, defence spending. For-profit colleges raise tuition fees when grants become more generous, reducing the multiplier effect of grants at these schools. 

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