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Estimating the Value of Higher Education Financial Aid : Evidence from a Field Experiment

Author

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  • Christian Belzil
  • Arnaud Maurel
  • Modibo Sidibé

Abstract

Using data from a Canadian field experiment on the financial barriers to higher education, we estimate the distribution of the value of financial aid for prospective students. We find that a considerable share of prospective students perceive significant credit constraints. Most of the individuals are willing to pay a sizable interest premium above the prevailing market rate for the option to take up a loan, with a median interest rate wedge equal to 6.8 percentage points for a $1,000 loan. The willingness-to-pay for financial aid is highly heterogeneous across students, with preferences and in particular discount factors playing a key role in accounting for the variation.

Suggested Citation

  • Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2020. "Estimating the Value of Higher Education Financial Aid : Evidence from a Field Experiment," CIRANO Working Papers 2020s-38, CIRANO.
    • Handle: RePEc:cir:cirwor:2020s-38
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    File URL: https://cirano.qc.ca/files/publications/2020s-38.pdf
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    1. is not listed on IDEAS
    2. Don Tawanpitak, 2024. "Paying Tuition under Few Credit Constraints: Debt, Field of Study, and Drop Out," PIER Discussion Papers 226, Puey Ungphakorn Institute for Economic Research, revised Jan 2025.
    3. Christian Belzil & Tomáš Jagelka, 2024. "Separating Preferences from Endogenous Effort and Cognitive Noise in Observed Decisions," Working Papers 2024-13, Center for Research in Economics and Statistics.
    4. Belzil, Christian & Pernaudet, Julie & Poinas, François, 2021. "Estimating Coherency between Survey Data and Incentivized Experimental Data," IZA Discussion Papers 14594, IZA Network @ LISER.
    5. Jérôme Adda & Christian Dustmann & Joseph-Simon Görlach, 2022. "The Dynamics of Return Migration, Human Capital Accumulation, and Wage Assimilation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 2841-2871.
    6. Belzil, Christian & Sidibé, Modibo, 2016. "Internal and External Validity of Experimental Risk and Time Preferences," IZA Discussion Papers 10348, IZA Network @ LISER.
    7. Tomáš Jagelka, 2024. "Are Economists’ Preferences Psychologists’ Personality Traits? A Structural Approach," Journal of Political Economy, University of Chicago Press, vol. 132(3), pages 910-970.
    8. D'Haultfoeuille, Xavier & Gaillac, Christophe & Maurel, Arnaud, 2018. "Rationalizing Rational Expectations? Tests and Deviations," IZA Discussion Papers 11989, IZA Network @ LISER.
    9. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    10. Xavier D'Haultfoeuille & Christophe Gaillac & Arnaud Maurel, 2021. "Rationalizing rational expectations: Characterizations and tests," Quantitative Economics, Econometric Society, vol. 12(3), pages 817-842, July.
    11. Christian Belzil & Jörgen Hansen & Julie Pernaudet, 2024. "Les déterminants cognitifs et non-cognitifs du choix de filière et leur impact sur la phase initiale du cycle professionnel," CIRANO Project Reports 2024rp-06, CIRANO.
    12. Christian Belzil, 2018. "Évaluation de la valeur économique de l’aide financière pour l’éducation supérieure au Québec et en Ontario," CIRANO Project Reports 2018rp-08, CIRANO.
    13. Christian Belzil & Jörgen Hansen & Julie Pernaudet, 2024. "Separating the Structural and Composition Impacts of Financial Aid on the Choice of Major," Working Papers 2024-14, Center for Research in Economics and Statistics.
    14. Jeffrey T. Denning & Benjamin M. Marx & Lesley J. Turner, 2019. "ProPelled: The Effects of Grants on Graduation, Earnings, and Welfare," American Economic Journal: Applied Economics, American Economic Association, vol. 11(3), pages 193-224, July.

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    Keywords

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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