Caue Dobbin, Stanford PhD candidate
Financial Aid, and the Supply and Demand for Higher Education
Governments use student loans to promote access to higher education worldwide. However, the net increase in access can be substantially smaller than the number of beneficiaries, for at least two reasons. First, some of the beneficiaries would otherwise pay out-of-pocket. Second, institutions may raise tuition or reduce student aid. In my dissertation, I investigate the equilibrium effects of government-funded student loans and use my findings to propose an efficient allocation of these loans. I exploit a drastic contraction in the Brazilian student loan program. I show that institutions responded to the contraction by reducing tuition and offering additional scholarships. Our results suggest that 65% of loan beneficiaries would enroll in the same degree in the absence of federal loans. I then develop a model of the supply and demand for higher education. Using this framework, I show how governments can allocate loans to promote access at a lower fiscal cost.