Financial aid uncertainty and low-income students’ higher education preferences

Abstract

Low-income students’ preferences for higher education might depend on the uncertainty of financial aid. Using a time discontinuity design, this paper exploits the unanticipated cancellation of a nationwide Colombian merit and need-based scholarship, called Ser Pilo Paga, to study its consequences on students’ preferences for higher education. Preferences are measured using a discrete choice experiment administrated to 949 low-income high school students in 2018. The findings reveal that the scholarship’s cancellation reduced higher education ambitions among low-income students due to the decreased interest in both financial aid and high-quality universities. The effects were particularly concentrated on income-eligible individuals who were more likely to obtain the scholarship, as their choices for financial aid and high-quality institutions declined by 15 to 50% of the baseline preference.