PhD seminar - Carl Gergs (UCL)

Location: 321 Drayton House

Abstract: Does it matter whether means-tested financial aid for university students is offered as an interest-free loan or a grant? This paper uses novel and rich survey data to evaluate the impact of two reforms of such student aid in Germany. Whilst in 1983 the system was transformed to an entirely loan-based one, this decision was reversed in 1990 and a partial grant was re-introduced. We find that the first reform reduced enrolment amongst those eligible for funding by one third and students reallocated into paid apprenticeship training, a substantial impact which was not reversed by the latter reform. Furthermore, we document that whereas the first reform did not impact dropout rates, enrolment became more selective on high school grades. This was driven by first-generation students, who became even more positively selected compared to students whose parents completed higher education.