Giving kids a head start: The impact and mechanisms of early commitment of financial aid on poor students in rural China

We estimate the impact of two early commitment of financial aid (ECFA) programs—one at the start and one near the end of junior high school (seventh and ninth grades, respectively)—on the outcomes of poor, rural junior high students in China. Our results demonstrate that neither of the ECFA programs has a substantive effect. We find that the ninth-grade program had at most only a small (and likely negligible) effect on matriculation to high school. The seventh-grade program had no effect on either dropout rates during junior high school or on educational performance as measured by a standardized math test. The seventh-grade program did increase the plans of students to attend high school by 15%. In examining why ECFA was not able to motivate significant behavioral changes for ninth graders, we argue that the competitiveness of the education system successfully screened out poorer performing students and promoted better performing students. Thus by the ninth grade, the remaining students were already committed to going to high school regardless of ECFA support. In regards to the results of the seventh grade program, we show how seventh graders appear to be engaged in wishful thinking (they appear to change plans without reference to whether their plans are realistic). •We evaluate the impact of two early commitment of financial aid (ECFA) programs.•We compare the effects of early ECFA (seventh grade) vs. late ECFA (ninth grade).•Ninth grade recipients do not appear to matriculate high school at higher rates.•Seventh grade students change plans for high school but do not change behavior.•Seventh grade students engage in wishful thinking (make unrealistic plans).