Financial Student Aid and Enrollment in Higher Education: New Evidence from Germany

Abstract

Means-tested student aid might affect enrollment in higher education. To derive the potential influence of student aid, we use a tax-benefit microsimulation model. The effect is a non-linear function of parental income, with variation as a result of bracket creeping and various reforms. Therefore, the effect of student aid on enrollment can be separated from the effects of income and other family characteristics. Using the German Socio-Economic Panel, we find a small but significant positive effect, similar in size to the effects reported in previous studies for European countries but smaller than in the US.