Early commitment on financial aid and college decision making of poor students: Evidence from a randomized evaluation in rural China

Many educational systems have struggled with the question about how best to give out financial aid. In particular, if students do not know the amount of financial aid that they can receive before they make a decision about where to go to college and what major to study, it may distort their decision. This study utilizes an experiment (implemented by the authors as a Randomized Control Trial) to analyze whether or not an alternative way of providing financial aid by providing an early commitment on financial aid during the student's senior year of high school instead of after entering college affects the college decision making of poor students in rural China. We find that if early commitments are made early enough; and they are large enough, students will make less distorting college decisions. (C) 2011 Elsevier Ltd. All rights reserved.