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Monetary substitution of loans, earnings, and need-based aid in postsecondary education: The impact of Pell Grant eligibility

Author

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  • Evans, Brent J.
  • Nguyen, Tuan D.

Abstract

By applying a regression discontinuity design to national data of students at four-year colleges, this study identifies the average substitution effects of exogenously received increases of grant aid on hours of paid labor, earnings, and borrowing while in college. Results confirm students substitute grant aid for both paid labor and borrowing. An average increase of $1100 in grant aid reduces weekly job hours by 1.5–2 h per week for women, corresponding to a decline in annual earnings of $850, and reduces borrowing by an average of $300–$400 dollars among all students. We find limited evidence of grant aid's impact on academic outcomes.

Suggested Citation

  • Evans, Brent J. & Nguyen, Tuan D., 2019. "Monetary substitution of loans, earnings, and need-based aid in postsecondary education: The impact of Pell Grant eligibility," Economics of Education Review, Elsevier, vol. 70(C), pages 1-19.
    • Handle: RePEc:eee:ecoedu:v:70:y:2019:i:c:p:1-19
    DOI: 10.1016/j.econedurev.2019.02.004
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    Cited by:

    1. Kofoed, Michael S., 2022. "Pell Grants and Labor Supply: Evidence from a Regression Kink," IZA Discussion Papers 15061, Institute of Labor Economics (IZA).
    2. Anderson, Drew M., 2020. "When financial aid is scarce: The challenge of allocating college aid where it is needed most," Journal of Public Economics, Elsevier, vol. 190(C).
    3. Anik Ashraf & Elizabeth Lyons, 2023. "Complementing Business Training with Access to Finance: Evidence from SMEs in Kenya," Rationality and Competition Discussion Paper Series 416, CRC TRR 190 Rationality and Competition.

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