Gregg Flecha earned pretty good money last year, for a 9-year-old. As a fourth-grader at P.S. 64 in the East Village neighborhood of Manhattan, Gregg raked in more than $200 for getting high scores on certain tests. His school participated in a New York City pilot program that aimed to inspire children from low-income families to do well in school by putting as much as $250 in their pockets for getting high marks. Gregg says his friends at other schools were a bit jealous--after all, that kind of cash could buy a lot of video games. "But I don't really want to buy video games," he says. "When I grow up, I want that money to be there for college."

Gregg's save-it-for-later attitude is surprisingly common among his peers. Silas Nelson Richards, a student at P.S. 335 in Brooklyn, says he banked all of his classroom earnings. Naja'e Lee-Logan, one of Silas' classmates, says she saved most of hers, too, although she admits that she once went on a $1.50 ice cream splurge. As researchers begin to assess the results of New York's two-year cash-for-grades experiment, which ended in June, one thing is clear: The kids didn't blow all the money on candy bars, sneakers and Miley Cyrus singles.

That's because of the way the program was structured. The schools worked with students to open savings accounts and, in most cases, the checks were sent direct-deposit to the bank. Students were free to withdraw however much of the money they chose--it belonged to them, not their parents--but the schools worked hard to emphasize the importance of saving for college. The accounts were incorporated into lesson plans, and teachers cast them as links to an academic future. The result is that fourth- and fifth-graders, many of whom would be the first in their families to attend college, now find themselves thinking about graduation quite a bit.

New York is not the only city that's been paying kids to hit the books. Atlanta, Baltimore, Chicago and Washington, D.C., all have tried out cash-for-grades programs on a pilot basis recently. Meanwhile, across the country, there's a renewed interest in the idea of paying teachers for good performance, as measured by test scores and other gauges of classroom success. Facing an education gap for poorer students and languishing graduation rates, some big-city schools are desperate to try anything to shake up the dynamic. Increasingly, that means using money as a motivator.

Support for this idea--especially paying students for earning good grades--runs stronger the closer you get to the classroom. "It's been outstanding for us," says Laverne Nimmons, the principal of P.S. 335. "The students took to it immediately." Nimmons sees cash incentives not only as an academic motivator for students but also a ticket out of poverty. "When you get into wealthier, upper-middle class families, you get parents who reward their children for good grades. They pay for after-school programs or private tutors to help improve their grades." Those are luxuries that Nimmons' students can't afford. "These are children in an impoverished community. There are no rewards. With this program, we're just trying to create a level playing field."

Opponents of incentives programs, including experts in education and child psychology, say bonus money won't change students' study habits in any lasting way. In fact, they argue, the incentives may backfire and hurt student performance in the long run. Others are simply uncomfortable with the social implications of paying some students to learn but not others. "It becomes a condescending situation," says Heather MacDonald, an author who has written about education for the Manhattan Institute. "I just find it troubling that half of society is paying the other half to do something the first half already knows it should be doing. Who is in the paying class and who is in the paid class? How do you explain to one group of students that they should value education for its own sake while some of their classmates are getting money for the exact same thing?"

Offering incentives to motivate students isn't a new concept. Schools have tried rewarding good grades with trinkets such as gold stars and pencils, as well as off-campus lunches and pizza parties. It's only recently that schools began raising the stakes by offering expensive prizes such as MP3 players and cell phones, and now, significant sums of cash.

Roland Fryer is the inspiration behind several of these experiments. Fryer grew up in poverty in Florida, but went on to get his doctorate in economics. He launched New York's program in 2007, while serving as the school system's chief equality officer. Later, at Harvard University, Fryer helped found the Education Innovation Laboratory, something of an R&D shop for studying unconventional ideas aimed at closing the education achievement gap for poor kids. Through EdLabs, Fryer expanded New York's program and exported variants to participating schools in Chicago and Washington, D.C. For the 2008-09 school year, some 15,000 students in those three cities were enrolled in cash-for-grades plans, paid for in part by EdLabs.

These cities are hoping that monetary incentives will succeed where so many other strategies to improve underperforming schools have failed. "Over the last several years, we've struggled with a graduation rate of 55 percent," says Katie Ellis, the project manager for Chicago's incentives program. "That is very troubling. At this point, we're not willing to turn away from any innovation that might help."

In each of the EdLabs pilot cities, cash incentives drew criticism before they were in place. The chief concern was a moral one. "We had lots of responses from parents and people in the community who would say, 'Students should be learning for the intrinsic value of learning,'" says Ellis. A lot of teachers, too, were negative about the idea at first. In the end, however, only about 5 percent of parents opted their kids out of the program. Ellis says that as parents and teachers learned more about the programs, they tended to come around.

But are incentives working? Anecdotally, there's some evidence that student bonuses are changing the classroom environment for the better. In Chicago schools participating in the program, according to Ellis, student attendance is up and there are fewer incidents requiring disciplinary action. "I've also heard that more students are debating with their teachers about what grade they get," Ellis says. "Just the fact that they're willing to go in and advocate for themselves, that's a behavior that wasn't necessarily happening before." Washington, D.C., schools are reporting that students in the cash-incentive program are doing a better job completing their homework and that they're wearing their uniforms to school more often.

Atlanta officials say their pilot program, which pays struggling students $8 an hour to attend tutoring sessions, is getting results. The brainchild of Newt Gingrich and his daughter, Jackie Gingrich Cushman, the program started in the spring of 2008, and is not related to the EdLabs pilots. Students who have gone through it are outperforming their peers, according to Greg Fields, the Fulton County Schools administrator who helped design and implement the program. "The program really did make a positive difference for about 90 percent of the students," he says. The story is much the same in Texas, where students in more than 70 high schools can earn paychecks for passing Advanced Placement tests. The number of high schoolers taking the tests has exploded at a rate 10 times the national average. Independent research suggests that students who participate in the program score better on their SATs and are more likely to apply to college.

The hard part in assessing any of these programs is isolating the actual impact of the cash. Students in the Atlanta program may be improving their grades, but is that because of the $32-a-week paycheck or because of the four hours a week of intensely focused tutoring? Texas students may be scoring higher on college-entrance tests, but is that because they received $300 or because of the increased attention and encouragement from teachers and the months spent studying and taking practice exams?

Academics who study rewards argue that anecdotal evidence from the cash-for-grades pilots should be treated with caution. Doling out cash is a form of what researchers refer to as "extrinsic" motivation (as opposed to "intrinsic" motivation--that is, an inner drive to succeed). It's difficult to turn short-term gains from such external encouragement into sustained results. "Everything I know about motivation tells me that extrinsic rewards eventually will stop working," says Barbara Marinak, an assistant professor of education at Pennsylvania State University who has studied these kinds of programs. Test scores may improve initially, she says, but as soon as the incentive is taken away, performance will drop back down. "All the research would support the fact that it's going to undermine any long-term gains."

In fact, there's some concern that rewards programs could do long-term damage. Several psychological studies over the past 40 years suggest that rewards ultimately undercut a child's interest in learning. In one of the earliest of these studies, published in 1971, University of Rochester psychologist Edward Deci found that once students stopped receiving rewards for their work, they were actually less motivated than students who had never received incentives in the first place. Alfie Kohn, an education and parenting writer, says that's still true. Kohn published Punished By Rewards: The Trouble with Gold Stars, Incentive Plans, A's and Other Bribes in 1993. "Rewards, like punishments, can produce only one thing: temporary obedience," Kohn says today. "What they can never do is help kids become more effective or enthusiastic learners." As Kohn sees it, the more you reward people for doing something, the more they tend to lose interest in whatever they had to do to get the reward. "So these incentives aren't just ineffective," he says. "They're actually counterproductive."

Advocates of cash rewards hope this latest wave of incentives programs proves to be different. The extrinsic motivation of cash, they hope, may be enough to get kids to show up for school and try. Once in the classroom, perhaps they'll develop an intrinsic desire to learn. Daniel Willingham, a professor of cognitive psychology at the University of Virginia, says that's a risky bet. But he understands why some schools feel that desperate times call for desperate measures. "You have to think about it like taking out a loan from the bank," Willingham says. "You don't want to make a habit of taking out a loan, but there are times when it makes sense."

Even if you agree that incentives are at least worth a shot, these are not easy programs to manage. For one thing, getting the right amount of money into the right student's hands practically requires its own payroll system--some children in the Washington, D.C., program have complained that they haven't received their checks on time. What's more, injecting money into a school setting can trigger jealousies and retributions. One day last October, a D.C. teacher caught some students rifling through unattended backpacks and found torn incentives paychecks on the floor.

The biggest threat to cash-in-the-classroom experiments is funding. Even small programs come with sizable price tags. In Washington, half of the $2.7 million annual cost is paid by Harvard; the city pays the rest. Other cities have relied entirely on private contributions. That makes the programs more politically palatable, but in Chicago, funding has dried up, making its continuation unlikely.

The same was true for another incentives program in New York, one that came after the program that turned Gregg Flecha, Silas Nelson Richards and Naja'e Lee-Logan into savers. That program, launched by EdLabs, gave good students free cell phones with prepaid minutes for calls and text messages. Roland Fryer hailed the program as perhaps "the most important innovation for urban education since the slide rule." Six months later, it was suspended indefinitely due to lack of funds.

"The program isn't a silver bullet," admits Marlon Hosang, the principal of Gregg Flecha's elementary school. Hosang believes cash incentives have been good for the students at his school, but he's not sure if this idea has long-term potential. "As a pilot program at our school, it was kind of interesting and fun to do," Hosang says. "I'm sure it was great for them to receive a check. But the bottom line is that it's all about high-quality instruction. That's the most important thing."