The effects of financial aid on graduation and labor market outcomes: New evidence from matched education-labor data

Abstract

Financial aid decreases the cost of acquiring additional education. By using Italian administrative and survey data on financial aid recipients and exploiting sharp discontinuities in the amount of aid received, this paper identifies the causal effect of aid generosity on college performance and labor market outcomes. The results show that students facing a higher cost of college earn more credits each year than those receiving higher financial aid. This gap generates a significant difference in the overall graduation time. No differences emerge in the GPA level or the probability of graduating from college.