Despite the growing popularity of free college proposals, countries with higher college subsidies tend to have higher enrollment rates but not higher graduation rates. To capture this evidence and evaluate potential free college policies, we rely on a dynamic model of college enrollment, performance, and graduation estimated using rich student-level data from Colombia. In the model, student effort affects class completion and mitigates the risk of performing poorly or dropping out. Among our simulated policies, universal free college expands enrollment the most but has virtually no effect on graduation rates, helping explain the cross-country evidence. Performance-based free college triggers a more modest enrollment expansion but delivers a higher graduation rate at a lower fiscal cost. While both programs lower student uncertainty relative to the baseline, performance-based free college does it to a lower extent, which in turn promotes better student outcomes. Overall, free college programs expand enrollment but have limited impacts on graduation and attainment due to their limited impact on student effort.
This paper estimates a dynamic model of college enrollment, progression, and graduation. A central feature of the model is student effort, which has a direct effect on class completion and an indirect effect mitigating risks on class completion and college persistence. The estimated model matches rich administrative data for a representative cohort of college students in Colombia. Estimates indicate that effort has a much greater impact than ability on class completion. Failing to consider effort as an input to class completion leads to overestimating ability’s role by a factor of two or three. It also promotes tuition discounts based on a pre-determined student trait—ability—rather than effort, which can be affected through policy, thus limiting higher education’s potential for social mobility.