Does free tuition promote equity in higher education? impact on academic performance of low-income university students

The expansion of higher education has led to new challenges for educational equity, which extend beyond access. A key policy response has been the implementation of different student aid programs. The various types of aid are based on different eligibility criteria, reflecting contrasting conceptions of what constitutes educational equity. This study assesses the impact of the Chilean free tuition policy, a need-based financial aid, on the academic performance of low-income students, comparing it to other forms of student aid. A multilevel model was estimated using administrative data from 10 Chilean universities for cohorts admitted in 2010 and 2016. The results show that, during the first year, students with free tuition outperformed both those without financial aid and those who relied on loans. In the third and fourth years, students who received free tuition continued to perform better than those with loans but showed lower academic performance than recipients of merit-based scholarships. The findings suggest that different types of aid are associated with different academic trajectories, which raise essential questions about the equity implications of merit-based versus need-based funding models. Rather than treating these approaches as mutually exclusive, our results highlight the need for a more balanced design that considers both performance and structural disadvantages. This would contribute to the efficient use of public resources and promote greater equity in higher education.