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Is Debt Relief as Good as Liquidity? The Impact of Prospective Student Debt on Post-Secondary Attendance among Low-Income Youth

Marc Frenette

CLSSRN working papers from Vancouver School of Economics

Abstract: In this study, I estimate the impact of offering two large non-refundable grants to low-income Canadian youth on postsecondary attendance. The grants had two interesting features. First, they were clawed back from loans, thus reducing costs but providing no additional liquidity. Second, the grants were only available to students if parental income was below a fixed threshold. This sharp discontinuity in the offer of the grants provides for near ideal conditions to study their causal impact, closely mimicking random assignment. Despite the large size of the grants (up to $6,000 or $7,000), the fact that students were automatically assessed for the grants with their regular student loans application, and evidence that most Canadian youth are at least aware of non-refundable study grant opportunities, I find that the grants had no impact on postsecondary or university attendance. Some policy implications are discussed.

Keywords: Access to postsecondary; student debt (search for similar items in EconPapers)
JEL-codes: I22 I23 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011-03-29, Revised 2011-03-29
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