The Savings Impact of College Financial Aid
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Andrew W. Dick
When parents save money for their children's college education, a portion of their savings is later taken away in the form of reduced eligibility for college financial aid. We estimate the long-run impact of this implicit asset tax by estimating family preferences over life-cycle consumption, savings and college choices and then simulating family choices over these variables under various hypothetical financial aid systems with different asset treatments. Our simulations suggest that the implicit taxes in the current college financial aid system may in the long run reduce economy-wide asset holdings in the U.S. by $186 billion versus aid systems with no implicit asset taxes. This figure is less than 1% of total U.S. wealth during the years of our data. It, however, reflects a 10.2% reduction is asset holdings for affected families.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Contributions Article
- Suggested Subsidies are Sub-optimal Unless Combined with an Output Tax
- War or Peace
- Selective Information Provision and Special Interest Influence: The Case of Trade Policy
- Price Discrimination via Proprietary Aftermarkets
- The Spite Motive and Equilibrium Behavior in Auctions
- Optimal Liability for Libel
- Aggregation of Non Stationary Demand Systems
- The Savings Impact of College Financial Aid
- A Theory of Utilization Review
- Cigarette Demand, Structural Change, and Advertising Bans: International Evidence, 1970-1995
- Piracy and the Legitimate Demand for Recorded Music
- Oligopoly Deregulation and the Taxation of Commodities
- Forming Voting Blocs and Coalitions as a Prisoner's Dilemma: A Possible Theoretical Explanation for Political Instability
- Ethnicity and Networks in African Trade
- Endogenous Preferential Trade Agreements: An Empirical Analysis
