When the Need Meets Merit: The Role of Merit Requirements in Need-based Student Aid

FBK-IRVAPP is pleased to invite you to the following seminar:
​​“When the Need Meets Merit: The Role of Merit Requirements in Need-based Student Aid – Causal Evidence from an Italian University”

With the participation of: Massimiliano Bratti

Language The seminar is held in English.

Abstract: Concerns about efficiency and equity motivate policymakers to understand the effect of setting performance standards in need-based student aid. Merit requirements may exacerbate inequality in higher education, but at the at the same time they might improve efficiency of aid expenditure, e.g. by increasing on-time graduation. In 2011/12, the Lombardy Regional government, in Italy, implemented a reform of the financial aid system for university students. The merit-based component for meeting renewal requirements of a need-based aid grant increased from 25 to 35 (out of a maximum of 60) credits to be earned at the end of the first year of enrollment. This paper seeks to estimate the effect of this policy change on eligible students’ short and long-run academic performance, using a Difference-in-differences approach. The findings demonstrate that tightening merit requirements had a statistically significant, positive effect on various dimensions of student performance. Aided students in cohorts after the reform acquire more university credits in the first year, along with better grades. Moreover, these effects persist over time and lead to an increase in the probability of on-time graduation. The impact of the policy is heterogenous and concentrated among high-ability students.