Who Benefits from a Lottery-Funded College Subsidy? Evidence from the New Mexico Success Scholarship

This paper investigates the enrollment, retention and academic performance effects of NM Success, a merit-based lottery-funded scholarship established in 1997, using student-level data from the University of New Mexico. While we find a staggering 56 per cent increase in University enrollments, the program pays out four subsidies for every new student attracted to college. Less academically able, higher income students have the greatest enrollment response. The program has not improved retention, and students have responded to its performance requirements by reducing their credit hours. Held to overall enrollment objectives, the program is truly a Success, but it fares less well when held to the standards of economic efficiency and distributional equity.