Financial Aid and Social Mobility: Evidence from Colombia's Ser Pilo Paga

The paper studies the impact of financial aid on long-term educational attainment and labor market outcomes in Colombia. In 2014, the government launched a large-scale and generous student loan program called "Ser Pilo Paga." It offered full tuition coverage to students admitted to one of 33 government-certified high-quality universities known for superior test scores, graduation rates, and per-student spending. Notably, completing a bachelor's degree converted the loan into a grant. To qualify, students must score in the top 10% of the standardized high school exit exam and have below-median household wealth. Using RD and DD methodologies, we use nationwide administrative microdata linking all high school test takers, postsecondary attendees, and formal workers to estimate impacts up to eight years after high school. Financial aid improves college enrollment, quality, and attainment, particularly in STEM-related fields. The earnings gains are substantial, growing, and driven partly by high-quality universities improving students' skills, as demonstrated by their performance on Colombia's college graduation exam. A welfare analysis using the MVPF yields over $4.8 per dollar of government spending. Lastly, the program narrowed socioeconomic gaps in college attainment, skill development, and earnings among academically similar students without adversely affecting non-recipients, thereby promoting equity and efficiency.