Working Paper: NBER ID: w27269
Authors: David Card; Alex Solis
Abstract: Governments around the world use grant and loan programs to ease the financial constraints that contribute to socioeconomic gaps in college completion. A growing body of research assesses the impact of grants; less is known about how loan programs affect persistence and degree completion. We use detailed administrative data from Chile to provide rigorous regression-discontinuity-based evidence on the impacts of loan eligibility for university students who retake the national admission test after their first year of studies. Those who score above a certain threshold become eligible for loans covering around 85% of tuition costs for the duration of their program. We find that access to loans increases the fraction who return to university for a second year by 20 percentage points, with two-thirds of the effect arising from a reduction in transfers to vocational colleges and one-third from a decline in the share who stop post-secondary schooling altogether. The longer-run impacts are smaller but remain highly significant, with a 12 percentage point impact on the fraction of marginally eligible retakers who complete a bachelor's degree.
Keywords: student loans; college persistence; financial aid; Chile
JEL Codes: I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Loan eligibility (G51) | College persistence (I23) |
| Loan eligibility (G51) | Transfers to vocational colleges (I23) |
| Loan eligibility (G51) | Stopping postsecondary education (I21) |
| Loan eligibility (G51) | Completion of bachelor's degree (Y40) |
| Access to loans (G21) | Switching to grant-based aid (I28) |
| Loan eligibility interacts with family income levels (I24) | College persistence (I23) |