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Is Debt Relief as Good as Liquidity? The Impact of Prospective Student Debt on Post-Secondary Attendance among Low-Income Youth

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  • Frenette, Marc

Abstract

In this study, I estimate the impact of offering two large non-refundable grants to low-income Canadian youth on postsecondary attendance. The grants had two interesting features. First, they were clawed back from loans, thus reducing costs but providing no additional liquidity. Second, the grants were only available to students if parental income was below a fixed threshold. This sharp discontinuity in the offer of the grants provides for near ideal conditions to study their causal impact, closely mimicking random assignment. Despite the large size of the grants (up to $6,000 or $7,000), the fact that students were automatically assessed for the grants with their regular student loans application, and evidence that most Canadian youth are at least aware of non-refundable study grant opportunities, I find that the grants had no impact on postsecondary or university attendance. Some policy implications are discussed.

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Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2011-7.

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Length: 43 pages
Date of creation: 29 Mar 2011
Date of revision: 29 Mar 2011
Handle: RePEc:ubc:clssrn:clsrn_admin-2011-7

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Web page: http://www.clsrn.econ.ubc.ca/

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Keywords: Access to postsecondary; student debt;

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References

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  1. Philippe Belley & Lance Lochner, 2007. "The Changing Role of Family Income and Ability in Determining Educational Achievement," Working Papers 2011-037, Human Capital and Economic Opportunity Working Group.
  2. Thomas Lemieux & Kevin Milligan, 2004. "Incentive Effects of Social Assistance: A Regression Discontinuity Approach," NBER Working Papers 10541, National Bureau of Economic Research, Inc.
  3. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
  4. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
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  8. Helena Skyt Nielsen & Torben Sørensen & Christopher Taber, 2008. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," Economics Working Papers, School of Economics and Management, University of Aarhus 2008-14, School of Economics and Management, University of Aarhus.
  9. Marc Frenette, 2006. "Too Far to Go On? Distance to School and University Participation," Education Economics, Taylor & Francis Journals, vol. 14(1), pages 31-58.
  10. Neill, Christine, 2009. "The Effect of Student Loan Limits on University Enrolments," CLSSRN working papers clsrn_admin-2009-11, Vancouver School of Economics, revised 02 Feb 2009.
  11. Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.
  12. Susan M. Dynarski, 1999. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," NBER Working Papers 7422, National Bureau of Economic Research, Inc.
  13. David M. Linsenmeier & Harvey S. Rosen & Cecilia Elena Rouse, 2002. "Financial Aid Packages and College Enrollment Decisions: An Econometric Case Study," NBER Working Papers 9228, National Bureau of Economic Research, Inc.
  14. Frenette, Marc, 2009. "Do universities benefit local youth? Evidence from the creation of new universities," Economics of Education Review, Elsevier, vol. 28(3), pages 318-328, June.
  15. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
  16. Hans J. Baumgartner & Viktor Steiner, 2004. "Enrolment into Higher Education and Changes in Repayment Obligations of Student Aid: Microeconometric Evidence for Germany," Discussion Papers of DIW Berlin 444, DIW Berlin, German Institute for Economic Research.
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