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From subsidies to loans: The effects of a national student finance reform on the choices of secondary school students

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  • Alexandre de Gendre

    (School of Economics, the University of Sydney; Institute for the Study of Labor (IZA); ARC Centre of Excellence for Children and Families over the Life Course)

  • Jan Kabátek

    (Melbourne Institute: Applied Economic & Social Research, the University of Melbourne)

Abstract

We analyse the effects of a national reform of higher education financing on the decision making of secondary school students in the Netherlands. The reform eliminated a universal subsidy for higher education students and replaced it by a low-interest loan, causing a substantive increase in the private costs of higher education. We show that the reform had a large impact on students’ decision making, decreasing the share of secondary school students following college-preparing tracks by 6.8 percentage points. The reform also affected students’ subject specialization choices, and the living arrangements of new college entrants. We show that secondary school students respond to the costs of higher education well ahead of their graduation, which has important consequences for the design of empirical studies of higher education financing. It also shows that policy uncertainty regarding financial aid is sufficient to deter many students from pursuing higher education.

Suggested Citation

  • Alexandre de Gendre & Jan Kabátek, 2021. "From subsidies to loans: The effects of a national student finance reform on the choices of secondary school students," Melbourne Institute Working Paper Series wp2021n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2021n12
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    More about this item

    Keywords

    Netherlands; higher education; student finance; financial aid; policy uncertainty;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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