EduQuant seminar: Elena Mattana
EduQuant would like to invite you for our next seminar with Elena Mattana (Aarhus University) will present her (co-authored Juanna S. Joensen) paper "Student Aid Design, Academic Achievement, and Labor Market Behavior: Grants or Loans?"
How does financial aid design affect student behavior and achievement? We first estimate the impact of a study-aid reform that caused students to work more and accumulate less debt. To quantify mechanisms and perform counterfactuals, we estimate a dynamic model of college enrollment, work, and loan take-up decisions. We find that grants have stronger effects on student behavior, student debt, and human capital when alternative income and borrowing opportunities are costlier. Loan repayment conditions affect dropout rates 3-4 times more when grants are 5% of aid compared to 50%. Individuals with lower endowments find income-contingent loans more beneficial, and their human capital is more sensitive to aid policies. Financial aid design can close the initial endowment gap in dropout rates, but it only reduces the gap in 4-year college degrees by 12% as most of the marginal graduates attain shorter degree programs with low labor market return.