In 2015 the Dutch government introduced a so-called social loan system in higher education. The new system replaced universal basic grants by income-contingent loans and offered supplementary grants to low-income students. The introduction of this reform was, and still is, highly controversial as it might create a financial barrier to access to higher education, particularly for young people from disadvantaged backgrounds.
This study investigates the causal impact of the reform on enrolment in higher education using administrative data of ten cohorts of students in Dutch secondary education. Students are observed from three years before until four years after their first option to enroll. This observation window allows us to mitigate bias by anticipating behaviour, for instance not taking a gap-year, or by postponement of decisions. Estimates of differences between cohorts based on local randomization show no negative effect of the policy on enrolment, nor on choosing the highest level of education or choosing STEM-education. We also don’t find a negative effect for low-income students or students with a migration background. The difference in enrolment between the last cohort receiving universal grants and the first cohort of the social loan system is very similar to the differences in enrolment between cohorts in previous years.
Moreover, we investigate the impact of the supplementary grant by exploiting the eligibility criteria in a kink regression discontinuity framework. Eligibility for the supplementary is based on parental background and the grant has a minimum value and a maximum value. We investigate whether the relationship between enrolment of students and parental background changes at the location of the the minimum value or the maximum value of the grant (the kinks in the policy formula). This analysis provides no evidence for a positive impact of the grant on enrolment at the location of the kinks for the minimum and maximum amount of the grant.
These findings suggest that a system of income-contingent loans can facilitate an increase of private contributions without harming access to higher education.
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