Borrowing Trouble? Human Capital Investment with Opt-In Costs and Implications for the Effectiveness of Grant Aid

A-Tier
Journal: American Economic Journal: Applied Economics
Year: 2018
Volume: 10
Issue: 2
Pages: 163-201

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We estimate the effect of grant aid on City University of New York (CUNY) students' borrowing and attainment using a regression discontinuity/kink design based on the federal Pell Grant formula. Each dollar of grant aid reduces loans by $1.80 among borrowers. We only find crowd-out of this magnitude in colleges that, like CUNY, "offer" no loan aid and require students to opt into borrowing. We develop and empirically support a model that shows opt-in or other fixed borrowing costs can lead grants to crowd out large amounts of loan aid, lowering some students attainment by reducing their liquid resources.

Technical Details

RePEc Handle
repec:aea:aejapp:v:10:y:2018:i:2:p:163-201
Journal Field
General
Author Count
2
Added to Database
2026-01-26