The effect of student aid reform on graduation

In this paper we estimate the effect of the change from a loan-based to a grant-based student financial aid system on the graduation times. Starting from simple assumptions on how the explanatory variables affect study intensity, we derive the duration distribution for the times-to-degree that turns out to follow a two parameter Gamma distribution. We then show that the effect of the time-varying covariates can be modelled as in an accelerated failure time model, but that the covariates have a cumulative impact on graduation times. Our empirical results indicate that the student aid reform slightly shortened the graduation times. Other results show that married students graduate faster and female students with children considerably slower. Also university resources and labor market conditions have a significant effect on graduation times. After controlling for various covariates, there are still substantial differences across different