Distance costs and university choice: What is the impact of a student aid reform

University students generally study close to the parental home, indicating they take into account that studying at a distance comes at a cost. Some students are willing and financially able to carry the costs of studying at a distance, while others are limited to the fields of study and universities located nearby. As such, distance costs create a dilemma and a disadvantaged position for those students growing up relatively far away from universities with little financial assistance from their parents. Several European governmental student aid programmes offer an additional student grant to those studying away from the parental home to compensate them partly for their higher financial costs. Yet, it is unclear whether such a financially oriented policy actually reduces spatial barriers in university choice and how it compares to a similar but less costly policy offering student loans instead of grants. This paper addresses this question by looking at a large reform in the Dutch governmental student aid programme after which new cohorts of students who moved away from the parental home to study no longer received an additional student grant but kept access to student loans. Using rich administrative data, we compare full cohorts of students that graduated secondary school before and after the reform in their choices on (non-)enrolment in higher education, field of study, and university attended. Using discrete choice models and (conditional) multinomial logistic regression, our results confirm that distance plays a role in each of the three educational decisions. Against expectations, the deterrent impact of distance does not differ between cohorts before and after the reform that replaced the grants with optional student loans for any of our outcomes. Students from high-income households are less deterred by distance than those from low- and middle-income families, but this gap did not increase after the reform. The move from student grants towards student loans in the Dutch 2015 reform fits in a larger pattern of decreasing public investments in higher education and higher private contributions of students. Our research suggests that such a change in policy will not necessary deteriorate the existing spatial inequality in students’ decision-making on higher education.