Career guidance and future planning are more effective than financial incentives in improving access to higher education for young people from low-income families, a new study of Canadian students concludes.
Done by Université de Montréal economist Laëtitia Renée and published in the American Economic Journal: Applied Economics, the longitudinal study followed more than 4,000 students from 30 New Brunswick high schools into adulthood.
The goal? To measure the relative effectiveness of an intensive career guidance program on the students versus financial assistance given conditionally on enrolment in a post-secondary institution.
Three groups studied
To compare the effect of the different approaches, students were randomly assigned to one of three experimental groups or the control group:
- In the "career guidance" group, students attended regular sessions over a three-year period, during which they planned their educational and professional future and explored study and career options to ease the transition from high school to university.
- In the "financial aid" group, students were offered a $9,600 grant-over and above the province's loans and bursaries program-conditional on enrolment in higher education, paid in several instalments over two years.
- In the "mixed" group, students received both the guidance program and the financial incentive.
- In the control group, students received neither intervention.
After four years, the career guidance program yielded a 10 percentage-point increase in post-secondary enrolment among participants, who were 50 per cent more likely than members of the control group to continue their education. This increase reduced the gap between the low-income participants and their more advantaged peers by 70 per cent.
"It translated into an additional 50 students enrolling in university after taking the program, which is quite significant," said Renée.
Ten years later, at age 29, the students who had taken the career guidance program were earning an average of $2,700 per year more than those who had not - a 10-per-cent difference.
The financial aid intervention increased enrolment in community colleges and universities slightly (by five and four percentage points respectively) but had no impact on attainment of a post-secondary degree. There was no statistically significant impact on income in adulthood; in fact, some of the data suggest it was slightly lower.
"We already have a good loans-and-bursaries program in Canada," said Renée. "Additional financial aid may encourage young people to enrol, but not necessarily in the right programs or under the right conditions. They don't necessarily benefit financially."
The additional financial support comes at a net cost to society and, unlike career guidance, doesn't generate additional tax revenue from higher future earnings.
Getting kids to think ahead
Renée believes the reason for the success of the career guidance program was that it made the participants think seriously about their future.
"At the guidance sessions, they are encouraged to consider their interests and goals and how to achieve them in practical terms," she said. "They have to map out their future path and rethink it in light of new information.
"The program tries to shift their frame of reference," she explained. "When you're surrounded by people who didn't go to university, you don't necessarily consider it, even if you have good grades."
Renée thinks the effect of information and expectations on educational choices is often underestimated, particularly for young people from lower-income backgrounds, and financial aid alone doesn't have the same transformational power.
$50,000 per pupil
Career guidance is a sound investment that not only reduces social inequality but yields long-term benefits for society as a whole, she said, estimating the program generated a net benefit of $50,000 per pupil, mainly through higher future incomes and tax revenues.
"What we're learning is that information, motivation and the ability to plan ahead are assets as valuable as money, and these are often lacking among the most vulnerable young people," said Renée.
However, she added a note of caution: some students who were encouraged by the program to enrol in higher education eventually dropped out. Additional academic support may be needed for such programs to be fully successful, she believes.
The study did not determine which components of the guidance program-the workshops, discussions or written exercises-had the greatest impact. Further research will be needed, said Renée.
"Nevertheless, this study shows that interventions of this kind can make a lasting difference to students' understanding of higher education and its benefits."
About this study
"The long-term effects of career guidance in high school and student financial aid: evidence from a randomized experiment," by Laëtitia Renée, was published in the April 2025 issue of the American Economic Journal: Applied Economics.
