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Student Aid, Academic Achievement, and Labor Market Behavior: Grants or Loans?

Author

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  • Elena Mattana

    (Universite` Catholique de Louvain - CORE)

  • Juanna Joensen

    (Stockholm School of Economics)

Abstract

We provide a framework for quantifying the impacts of implicit incentives in study aid schemes. We specify and estimate a dynamic discrete choice model of simultaneous education, work, and student loan take-up decisions exploiting the 2001 Swedish Study Aid reform for identification. This enables ex-ante evaluation of various changes to financial aid schemes. We find that the grant-loan mix does not affect student behavior as long as there is more weight on loans. When there is substantially higher weight on grants, however, more students graduate but stay enrolled longer. Moving from an income contingent to an annuity based loan repayment scheme substantially decreases student debt accumulation and improves the effectiveness of academic capital accumulation.

Suggested Citation

  • Elena Mattana & Juanna Joensen, 2014. "Student Aid, Academic Achievement, and Labor Market Behavior: Grants or Loans?," 2014 Meeting Papers 707, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:707
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    Cited by:

    1. Yan Ji, 2017. "Job Search under Debt: Aggregate Implications of Student Loans," 2017 Meeting Papers 222, Society for Economic Dynamics.

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