Estimating the value of higher education financial aid : evidence from a field experiment

Author / Creator

Belzil, Christian, author

Available as

Online

Summary

Using data from a Canadian field experiment on the financial barriers to higher education, we estimate the distribution of the value of financial aid for prospective students, and relate it to pare...

Using data from a Canadian field experiment on the financial barriers to higher education, we estimate the distribution of the value of financial aid for prospective students, and relate it to parental socio-economic background, individual skills, risk and time preferences. Our results point out that a considerable share of prospective students are affected by credit constraints. We find that most of the individuals are willing to pay a sizable interest premium above the prevailing market rate for the option to take up a loan, with a median interest rate wedge equal to 6.6 percentage points for a $1,000 loan. The willingness-to-pay for financial aid is highly heterogeneous across students, with preferences and in particular discount factors, playing a key role in accounting for this variation.

Show More