Replacing student grants with loans: Evidence from a Swedish policy reform

The Recruitment grant was a student aid policy that replaced the loans in the student aid system with grants for unemployed adults with low education. In this paper, I estimate the causal effects of repealing this policy on the educational attainment and subsequent labor market outcomes for the target population in a difference-in-differences framework. I find that the repeal reduced enrollment in adult education by 10 percent relative to the pre-repeal enrollment rate, and that the number of passed credits decreased by 29 percent. I also find that repeal increased unemployment by an average of 76 days over the eight-year follow-up, and decreased earnings by about 12,000 SEK ($1,300). Although there are substantial differences in these outcomes across subgroups, the repeal had significant adverse effects for the target population as a whole.