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Is debt relief as good as liquidity?

27 Mar 2011

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.
aid higher education education economics economy school poverty social security debt employment mathematics social sciences student loans students university financial aid pension tuition human activities college further education benefit job low-income college attendance regression discontinuity postsecondary education pell grant college students dummy variable (statistics) child benefit robustness deductions low-income college students

Authors

Frenette, Marc

Pages
43
Published in
Vancouver, British Columbia

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