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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.

Suggested Citation

  • Frenette, Marc, 2011. "Is Debt Relief as Good as Liquidity? The Impact of Prospective Student Debt on Post-Secondary Attendance among Low-Income Youth," CLSSRN working papers clsrn_admin-2011-7, Vancouver School of Economics, revised 29 Mar 2011.
  • Handle: RePEc:ubc:clssrn:clsrn_admin-2011-7
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    File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no%20%2076%20-%20Frenette.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Access to postsecondary; student debt;

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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