From subsidies to loans: The effects of a national student finance reform on the choices of secondary school students

Alexandra de Gendre and Jan Kabátek

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We analyse the effects of a national reform of higher education financing on the decision making of secondary school students in the Netherlands. The reform eliminated a universal subsidy for higher education students and replaced it by a low-interest loan, causing a substantive increase in the private costs of higher education. We show that the reform had a large impact on students’ decision making, decreasing the share of secondary school students following college-preparing tracks by 6.8 percentage points. The reform also affected students’ subject specialization choices, and the living arrangements of new college entrants. We show that secondary school students respond to the costs of higher education well ahead of their graduation, which has important consequences for the design of empirical studies of higher education financing. It also shows that policy uncertainty regarding financial aid is sufficient to deter many students from pursuing higher education.

Keywords: Netherlands; higher education; student finance; financial aid; policy uncertainty (search for similar items in EconPapers)
JEL-codes: I22 I23 I24 (search for similar items in EconPapers)
Pages: 75pp
Date: 2021-07
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Related works:
Working Paper: From Subsidies to Loans: The Effects of a National Student Finance Reform on the Choices of Secondary School Students (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2021n12

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