Evaluating Education Financing Proposals
A government is considering two policies to increase university enrollment among students from low-income backgrounds.
- Policy A: Offer a non-repayable grant that covers 50% of tuition costs for every student.
- Policy B: Offer a government-backed, low-interest loan that covers 100% of tuition costs, with repayment required after graduation.
From the perspective of a student from a low-income family who is uncertain about their future career earnings, which policy is likely a stronger incentive to enroll in university? Justify your answer by explaining the key trade-offs this student faces with each option.
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