Abstract
We provide a framework for quantifying the impacts of implicit incentives in study aid schemes. We specify and estimate a dynamic discrete choice model of simultaneous education, work, and student loan take-up decisions using exploiting for identification the 2001 Swedish Study Aid reform. This enables ex-ante evaluation of various changes to financial aid schemes. We find that the grant-loan mix does not affect student behavior as long as there is more weight on loans. When there is substantially higher weight on grants, however, more students graduate but stay enrolled longer. Moving from an income contingent to an annuity based scheme with similar instalments for the average student substantially decreases student debt accumulation and improves the effectiveness of academic capital accumulation.