Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment

Scholarly Edition

Using data from a Canadian field experiment designed to elicit risk and time preferences and quantify 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 to credit constraints affecting a sizable share of prospective students. 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 also highly heterogeneous across students, with preferences, in particular discount factors, playing a key role in accounting for this variation.

Full Text

Duke Authors

Cited Authors

  • Belzil, C; Maurel, A; Sidibe, M

Published Date

  • June 1, 2016

Pages

  • 53