Over the previous two decades, state lawmakers have made two fundamental changes to how they finance their public universities. They have shifted more of the costs of higher education to students and their families through higher tuition rates; and created new grant programs that are not solely based on financial need but require prior demonstration of college readiness. It is known from prior evaluations of these new state-created grant programs that grant aid has a positive effect on graduation rates. However, no existing study has yet to offer a definitive estimate of effect size on graduation rates using data that best reflects the new normal of high tuition rates at public universities. The purpose of this evaluation is to fill this void by performing a regression discontinuity analysis that measures the effect of a need and merit-based grant program in 31 Texas public universities for student cohorts that entered college from 2004 to 2009. This study finds that receiving grant aid causes 4-year graduation rates to increase by 6% points and 6-year graduation rates to increase by 14 to 24% points. The results suggest that during times of austere public budgets states may be able to significantly increase graduation rates by targeting their financial aid dollars to students who demonstrate both financial need and academic preparation.