Liquidity constraints in free post-secondary education: Evidence from Colombia

Resumen:
This paper provides evidence of the importance of liquidity constraints in a tuition-free post-secondary education setting in Colombia. We exploit exogenous variation in the relative cost of tuition-free vocational education from a nationwide cash transfer program. We show that eligibility for a USD 136 grant every other month increases enrollment by up to 12 percentage points. We also show that men with larger returns to education are more affected by the availability of grants, which is consistent with the presence of liquidity constraints. However, we do not find the same for women. This paper highlights the importance of non-tuition costs and discusses whether individuals under-invest in their human capital when free education is available.