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The Effect of Student Aid on the Duration of Study

  • Daniela Glocker

In this paper I evaluate the effect of student aid on the success of academic studies. I focus on two dimensions, the duration of study and the probability of actually graduating with a degree. While there is an extensive literature on the impact of student aid on its intended outcome, the uptake of tertiary education, the impact on the outcome and on study incentives has been mainly ignored. But introducing student aid changes the students' budget constraint. The increase in the budget-set might lead to shorter time-to-degree if paid work is substituted by study time. I analyze the effect of financial student aid granted by the German Federal Education and Training Assistance Act (BAfoeG). To determine its impact, I estimate a discrete-time duration model allowing for competing risks to account for different exit states (graduation and dropout) using individual level panel data from the German Socio-Economic Panel (SOEP) for the years 1984-2007. My findings suggest that the duration of study is responsive to the type of financial support a student receives. There are three main results. First, student aid recipients finish faster than comparable students who are supported by the same amount of parental/private transfers only. Second, although higher financial aid does on average not affect the duration of study, this effect is (third) dominated by the increased probability of actually finishing university successfully.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 893.

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Length: 36 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp893
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  5. Glocker, Daniela, 2011. "The effect of student aid on the duration of study," Economics of Education Review, Elsevier, vol. 30(1), pages 177-190, February.
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  12. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
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  15. Ronald G. Ehrenberg & Panagiotis G. Mavros, 1992. "Do Doctoral Students' Financial Support Patterns Affect Their Times-to-Degree and Completion Probabilities," NBER Working Papers 4070, National Bureau of Economic Research, Inc.
  16. Todd R. Stinebrickner & Ralph Stinebrickner, 2007. "The Effect of Credit Constraints on the College Drop-Out Decision A Direct Approach Using a New Panel Study," NBER Working Papers 13340, National Bureau of Economic Research, Inc.
  17. Stephen L. DesJardins & Dennis A. Ahlburg & Brian P. McCall, 2002. "Simulating the Longitudinal Effects of Changes in Financial Aid on Student Departure from College," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 653-679.
  18. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  19. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
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