Quantifying the non-take-up of a need-based student grant in the Netherlands

We estimate the non-take-up rate of the need-based student grant in the Netherlands using administrative data on first-year students in higher education. We also investigate which student characteristics correlate with non-take-up. We find that 24% of all eligible students do not apply for the need-based student grant. Remarkably, one-third of the non-claimants do take on a student loan while leaving the grant on the table.

Introduction and methodology
In the Netherlands, the need-based student grant (the supplementary grant) is an important component of the student finance system. The grant is aimed at students from lower-income families and amounts to up to €396 per month. The exact amount of this grant mainly depends on parental income and the number of siblings.

In this paper, we estimate the non-uptake of the need-based grant of first-year students in higher education, using administrative data from the tax registry, public records from city halls, as well as enrolment and student finance data for the years 2013 to 2020. This allows us to construct an eligibility proxy for enrolled students, and compare it with the received amount of money if they applied for the grant. We further analyse the relationship between student characteristics and the non-take-up rate to estimate which types of students are more likely to not take up the grant when eligible. While our estimated coefficients cannot be interpreted causally, they contribute to the literature by providing a more precise estimate for a big representative sample of students. Moreover, the administrative data allow us to compare our proxy with the received amounts for each student.

Results
We find that 24% of eligible students in 2019 do not claim the grant and are missing out on an average of €180 per month. We obtain a negative relationship between non-take-up and the size of the grant. Whereas more than half of the students who are eligible for a relatively small student grant (below €50 per month) do not take up the grant, around 12% of the students who are entitled to at least €350 per month are not requesting it. At the same time, we find that 33% of eligible non-claimants borrow on average €542 per month while leaving an average of €165 on the table from the unclaimed supplementary grant. The grant – which is a performance-related grant and is to be turned into a gift if the student graduates within ten years – is superior to a loan.

Investigating the link between non-take-up of the student grant and student and parental characteristics in a probit model, we find that non-take-up is lower for students who have previously received a diploma in secondary vocational education (MBO level 4), who receive a healthcare allowance, or whose parents receive other social benefits. These results suggest that eligible students who are more likely to be familiar with the student grant system (because of their previous study programme) or with other types of social benefits are more likely to take up the grant. Furthermore, women, students in higher vocational education (as compared to students at universities) and students with a migration background have a lower probability of non-uptake.

What could determine the non-take-up rates? Previous studies indicate that there are four main determinants for the non-take-up of social benefits: pecuniary factors (the size and duration of the benefit), information costs, application costs, and stigma costs. There is no clear consensus on what constitutes the most important factor, and results on the importance of a particular mechanism seem to partially depend on the type of benefit and the research setup. Studies on the uptake of student grants suggest that in particular information costs and application costs could play an important role. Even though we cannot fully disentangle the impact of potential determinants, our results indicate that a lack of understanding or knowledge about the eligibility and/or the application procedure play a role in explaining the non-take-up rates. Our findings suggest that about one-third of the non-takers do take up a student loan, which is never more beneficial than the student grant. In addition, the student grant system changed in 2015. Before the change, 99% of the students took up a basic student grant, which used to have the same conditions and application procedure as the need-based grant, but was not means-tested. This indicates that application costs appear to be a minor factor in explaining the non-take-up. The new system is mean-tested and only students from families with relatively low incomes are entitled to receive the grant.

Context
This discussion paper is an update of the previous Dutch publication ‘Niet-gebruik van de aanvullende beurs’, published in December 2020 by CPB Netherlands Bureau for Economic Policy Analysis. The most important additions are the inclusion of two extra years being analysed with 2019 instead of 2018 now being the main year of interest. Since the previous publication, DUO has informed more students of the availability of the supplementary grant. Moreover, since the beginning of 2023, students automatically apply for the grant when requesting other forms of student finance (with the option to undo this). This SEO discussion paper is simultaneously published by the CPB as discussion paper 446 (DOI: https://doi.org/10.34932/f9ew-mk89).