Local governments can invest in this strategy using State and Local Fiscal Recovery Funds (SLFRF) from the American Rescue Plan Act (ARPA).

  • This strategy can help address educational disparities. The U.S. Department of Treasury has indicated that strategies that help achieve this outcome are eligible for the use of Fiscal Recovery Funds.
  • Investments in this strategy are SLFRF-eligible as long as they are made in qualified census tracts or are designed to assist populations or communities disproportionately impacted by COVID-19.

Program overview

  • Incentivizing academic performance: Performance-based scholarship programs provide financial aid to low-income college students that are conditional on achieving certain academic benchmarks. Such programs aim to both provide students with money they need to attend college and incentivize them to perform well academically.

  • Offering modest but flexible financial support: Typically, scholarships are relatively modest - between 15 and 25 percent of a student’s unmet financial need. To receive the scholarship, students must meet a set of academic standards, such as maintaining full-time enrollment or earning certain grades (e.g., a 2.0 GPA or better). Once earned, the funds are paid directly to students, who are allowed to spend the money on educational (e.g., textbooks) or personal expenses (e.g., transportation).

  • Common eligibility criteria and structure: Most often, performance-based scholarship programs are administered by colleges in collaboration with philanthropic and evaluation partners. While most programs target low-income students who are starting college, other eligibility criteria vary, with programs targeting specific demographic groups (e.g., Hispanic males).

Cost per Participant
$1,000 to $4,500 maximum scholarship amounts for two, three, or four semesters

A single study with a rigorous design provides some evidence for performance-based scholarships as a strategy for increasing academic achievement and college completion.

  • A 2015 randomized controlled trial found that students in performance-based scholarship programs earned an average of 2.1 more credits and were 3.3 percentage points more likely to complete their degree than students in the control group.
  • Distinguish between aid types when recruiting: Prospective students may be unfamiliar with college financial aid, and in particular with less-common aid types, like performance-based scholarships. Programs should emphasize the difference between traditional and performance-based aid before students matriculate to ensure students understand which financial aid is guaranteed.
  • Provide support services: In addition to financial challenges, students can face personal and academic barriers to success in college. To address these challenges, some colleges pair performance-based scholarships with support services designed to meet students’ personal and academic needs (e.g., access to tutoring, enhanced advising).

  • Designate a program coordinator: Typically, performance-based scholarship programs hire a dedicated administrator who is responsible for enrolling students, confirming their eligibility for each payment, and ensuring students are paid correctly. Having a dedicated staff member ensures proper coordination across financial aid, student services, and student accounts departments.

  • Separate payments from other aid: Performance-based scholarships are predicated on the idea that payments can incentivize better academic performance. To make clear that payments are distinct from traditional financial aid, programs should disburse performance-based aid separately from traditional aid.