Does financial aid help low income students go to university? Evidence for Italy

It is virtually a universal finding that young people from low income backgrounds are less likely to progress to higher education. It might seem therefore that low income is holding them back and the financial aid will therefore help. But the problem is that low income is correlated with many other factors that could also or be causing the problem: they are likely to be from families, communities and schools that don’t value education that highly or are not familiar with it. So their cultural capital may be lower – or their non-cognitive skills may be lower. Heckman’s work suggest that credit constraints are not that important and evidence for the UK is consistent with that although not everyone agrees. My own work emphasizes that educational attainment at second level explains a lot of the socio-economic gradient in progression to university in Ireland. that is working class kids get much worse Leaving Certificate grades and this explains, at least in a proximate sense, why they are much less likely to go to university.

The study below looks at a financial aid package in Italy designed to help low income students go to university but finds that it does not achieve that.

HOW DOES AID MATTER? THE EFFECT OF FINANCIAL AID ON UNIVERSITY ENROLMENT DECISIONS
Loris Vergolini, Nadir Zanini

ABSTRACT: Using a counterfactual approach, this paper empirically investigates the impact of an educational programme recently introduced in the Province of Trento (North-East of Italy). The aim of the policy is to foster university enrolment of students from low-income families and to reduce inequalities in access to higher education. The programme, known as Grant 5B, consists in generous incentives: it targets the university students from low-income families and is awarded upon both merit and demonstrated financial need. We exploit data from an ad hoc survey conducted on a sample of upper secondary graduates and employ a regression discontinuity design to estimate the impact of the intervention on the university enrolment decisions. We find that the programme has no significant effect on enrolment rates, but it exerts a positive effect on redirecting students already bound for university to enrol outside the place of residence. Relying on the relative risk aversion theory, we explain why a relaxation of the eligibility rules based on merit might be more effective in reducing social inequalities in access to university.

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