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Home | Events Archive | From Subsidies to Loans: The Effects of College Financing on Students’ High School Choices

From Subsidies to Loans: The Effects of College Financing on Students’ High School Choices

  • Series
  • Speaker(s)
    Jan Kabatek (University of Melbourne, Australia)
  • Field
    Organizations and Markets
  • Location
    Erasmus University Rotterdam, Polak Building, Room 1-23
  • Date and time

    March 04, 2019
    12:00 - 13:15

Abstract :In 2015, the Dutch government implemented a reform which turned universal, unconditional subsidies for college students into low-interest public loans. We estimate the effect of this reform on the educational choices of secondary school students. We focus on students’ choice of a high school track (vocational, general, and academic), and subject specialization. Using administrative records covering all high school students in the Netherlands we show that the reform affected students’ behavior in several ways. First, the reform lowered enrollment into academic and general tracks by 13% and 6% respectively. Enrollment into the vocational track increased by 8%. Similarly, students in the academic and technical tracks who had learnt about the reform past enrollment became more likely to switch to lower tracks. The reform also led to a 5% increase in the take-up of STEM and Medicine specialization among students in the academic and general tracks. Our results reveal early forward-looking behavior of students which is consistent with debt aversion, with considerable heterogeneity across family income, cognitive ability and gender.