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

53 Pages Posted: 3 Nov 2016  

Christian Belzil

Ecole Polytechnique, Paris - Department of Economic Sciences; National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); Institute for the Study of Labor (IZA); Center for Interuniversity Research and Analysis on Organization (CIRANO)

Arnaud Maurel

Duke University - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Modibo Sidibe

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2016

Abstract

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.

Keywords: Higher Education Financing, Time and Risk Preferences, Field Experiment

JEL Classification: I22, I23, J24

Suggested Citation

Belzil, Christian and Maurel, Arnaud and Sidibe, Modibo, Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment (June 1, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 235. Available at SSRN: https://ssrn.com/abstract=2863322

Christian Belzil

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE)

92245 Malakoff Cedex
France

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Center for Interuniversity Research and Analysis on Organization (CIRANO)

2020 rue University, 25th Floor
Montreal, Quebec H3C 3J7
Canada

Arnaud Maurel

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Modibo Sidibe (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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