Grants vs. Loans: The Role of Financial Aid in College Major Choice

58 Pages Posted: 26 Oct 2023

See all articles by Adriano De Falco

Adriano De Falco

European University Institute

Yannick Reichlin

European University Institute

Date Written: September 23, 2023

Abstract

Using administrative data from Chile, we analyze whether financing higher education through student loans or grants affects college major choices of prospective university students. We exploit institutional arrangements that allocate either type of financing based on a standardized test to locally identify exogenous variation in access. Students that are marginally eligible for grants are more likely to enroll in STEM-related fields. Relying on information from past graduates on narrowly defined college programs, we provide evidence that this effect is more generally driven by grants acting as insurance mechanism against uncertainty about degree completion.

Keywords: major choice, financial aid, education policy, regression-discontinuity-design

JEL Classification: H52, H81, I22, I28

Suggested Citation

De Falco, Adriano and Reichlin, Yannick, Grants vs. Loans: The Role of Financial Aid in College Major Choice (September 23, 2023). Available at SSRN: https://ssrn.com/abstract=4581235 or http://dx.doi.org/10.2139/ssrn.4581235

Adriano De Falco (Contact Author)

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Yannick Reichlin

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

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