The Mexico’s conditional cash transfer program (CCT), PROGRESA, is wellknown for its positive impacts on education, and more than 25 countries have replicated the model. However, 35% of adolescents between 14 and 17 years from families participating in the PROGRESA program drop out of school. This paper investigates why PROGRESA fails to prevent a substantial number of students from dropping out, and finds that bullying and the death of a father are important factors. I exploit an unusually rich data set that includes information about psychological conditions of adolescents, as well as their social environments. To assess the problem of omitted variable bias, I use two newly developed bounding methodologies. I find that boys have higher rates of bullying than girls, but bullying affects only girls’ probability of dropping out of school. In particular, I find that a one standard deviation increase of being bullied increases the probability of not being enrolled in school by approximately 6 percentage points. Likewise, the death of a father affects only girls, and after losing their fathers, girls are 30 percentage points more likely to stay at home and not study. Finally, I do not find evidence that the death of a mother affects the probability of dropping out of school for either girls or boys. While PROGRESA has positive effects on education, its current design does not protect individuals, particularly girls, from the social cost of bullying and from major life-changing events such as the death of a father.