Estimating the E¤ect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform (Preliminary and Incomplete)

The purpose of this paper is to investigate the responsiveness of the demand for college to changes in student aid arising from a Danish reform. Student aid in Denmark is means-tested, so accounting for borrowing contraints in the analysis is crucial. We separately identify the e¤ect of aid from that of other observed and unobserved variables such as parental income. For the Danish case, we exploit the combination of a kinked aid scheme and the reform of the student aid scheme to identify the e¤ect of direct costs on college enrollment. We …nd that enrollment is less responsive than found in other studies and that the presence of borrowing constraints is neither statistically or economically important. Keywords: college attendance, educational subsidies, reform, kink regression. JEL classi…cation: I22, J24.