Estimating the value of higher education financial aid: Evidence from a field experiment

Using data from a Canadian field experiment on financial barriers to higher education, we estimate the distribution of the value of financial aid for prospective students. We find that a considerable share of prospective students perceive significant credit constraints. Most individuals are willing to pay a sizable interest premium above the prevailingmarket rate for the optiontotake up a loan,withamedian interest rate wedge equal to 6.8 percentage points for a $1,000 loan. The willingness to pay for financial aid is heterogeneous across students, withdiscount factorsplayingakeyrole in accountingfor this variation.