Finish it and it is free: An evaluation of college graduation subsidies

Abstract

Despite the rapid increase in the returns to higher education witnessed in the labor market over the past few decades, there has also been a marked increase in the share of individuals who drop out of college or university. Several Canadian provincial governments introduced graduate retention tax credits available to students after their graduation. Credit availability was tied to students successfully completing their education with the aim of increasing the local stock of human capital by discouraging cross-province migration. We analyze the efficacy of the graduate retention tax credits within a difference-in-difference framework using confidential data from both administrative tax records and longitudinal surveys. Graduate retention credits were unable to decrease internal migration but were able to reduce the interest graduates paid on their loans.