The role of need-based grants on higher education achievement
JELs I21, I22, I23, I28, H52
Keywords Need-based grants; college achievement; incentives
Abstract Little evidence exists on the specific contribution of performance-incentive components to the effect of need-based financial aid on student's outcomes. This paper aims at elucidate the causal effect of financial aid on the academic performance of low-income students in higher education, using administrative micro-data from Carlos III University of Madrid. I use the sharp discontinuities that are induced by family income thresholds to estimate the effect of being eligible to different categories of scholarships, and exploit the fact that academic performance requirements (i.e., having passed a certain number of credits in the previous academic year) became more stringent for students who applied for a Spanish need-based grant after 2013. I find no effects on students' academic performance of the large means-tested grant with weak achievement component. However, we find positive effects on students' academic performance when achievement component is more demanding for those students who are more entitle to the grant. Students' also enhance their fraction of turned-up exams and their average GPA on subjects showed-up to final exam, while no evidence is found on students' subject selectivity and dropout effects.
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