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Who benefits from student aid? The economic incidence of tax-based federal student aid

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  • Turner, Nicholas

Abstract

Federal benefit programs, including federal student aid, are designed to aid targeted populations. Behavioral responses to these programs may alter the incidence of their benefits, a possibility that receives less attention in the literature compared to tax incidence. I demonstrate the importance of benefit incidence analysis by showing that the intended cost reductions of tax-based federal student aid are substantially offset by institutional price increases for a sample of 4-year colleges and universities. Contrary to the goal of policymakers, I find that tax-based aid crowds out institutional aid roughly dollar-for-dollar. Unfortunately, it is not clear how institutions utilize these captured resources, so that the ultimate incidence of the programs is uncertain.

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  • Turner, Nicholas, 2012. "Who benefits from student aid? The economic incidence of tax-based federal student aid," Economics of Education Review, Elsevier, vol. 31(4), pages 463-481.
    • Handle: RePEc:eee:ecoedu:v:31:y:2012:i:4:p:463-481
    DOI: 10.1016/j.econedurev.2011.12.008
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    Cited by:

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    2. Stratton Leslie S. & Wetzel James N., 2013. "Are Students Dropping Out or Simply Dragging Out the College Experience? Persistence at the Six-Year Mark," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 1121-1142, October.
    3. Baum-Snow, Nathaniel & Ferreira, Fernando, 2015. "Causal Inference in Urban and Regional Economics," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 3-68, Elsevier.
    4. Eloïse Corazza & Francesco Filippucci, 2022. "Who Profits from Training Subsidies? Evidence from a French Individual Learning Account," PSE Working Papers halshs-03519664, HAL.
    5. Stephanie R. Cellini & Rajeev Darolia & Lesley J. Turner, 2020. "Where Do Students Go When For-Profit Colleges Lose Federal Aid?," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 46-83, May.
    6. Grey Gordon & Aaron Hedlund, 2017. "Accounting for the Rise in College Tuition," NBER Chapters, in: Education, Skills, and Technical Change: Implications for Future US GDP Growth, pages 357-394, National Bureau of Economic Research, Inc.
    7. Stephanie Riegg Cellini & Claudia Goldin, 2014. "Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 174-206, November.
    8. Matthew Baird & Michael S. Kofoed & Trey Miller & Jennie Wenger, 2022. "Veteran Educators or For‐Profiteers? Tuition Responses to Changes in the Post‐9/11 GI Bill," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(4), pages 1012-1039, September.
    9. Jason Brennan & Phillip Magness, 2018. "Estimating the Cost of Justice for Adjuncts: A Case Study in University Business Ethics," Journal of Business Ethics, Springer, vol. 148(1), pages 155-168, March.
    10. Brad J. Hershbein & Kevin Hollenbeck, 2013. "The Distribution of College Graduate Debt, 1990 to 2008: A Decomposition Approach," Upjohn Working Papers 14-204, W.E. Upjohn Institute for Employment Research.
    11. LeGower, Michael & Walsh, Randall, 2017. "Promise scholarship programs as place-making policy: Evidence from school enrollment and housing prices," Journal of Urban Economics, Elsevier, vol. 101(C), pages 74-89.
    12. Aaron Hedlund & Grey Gordon, 2017. "Accounting for Tuition Increases at U.S. Colleges," 2017 Meeting Papers 1550, Society for Economic Dynamics.
    13. Andrew Barr & Sarah E. Turner, 2013. "Expanding Enrollments and Contracting State Budgets," The ANNALS of the American Academy of Political and Social Science, , vol. 650(1), pages 168-193, November.
    14. Bednar, Steven & Gicheva, Dora, 2013. "Tax benefits for graduate education: Incentives for whom?," Economics of Education Review, Elsevier, vol. 36(C), pages 181-197.
    15. Bergman, Peter & Denning, Jeffrey T. & Manoli, Dayanand, 2017. "Broken Tax Breaks? Evidence from a Tax Credit Information Experiment with 1,000,000 Students," IZA Discussion Papers 10997, Institute of Labor Economics (IZA).
    16. Susan Dynarski & Judith Scott-Clayton, 2016. "Tax Benefits for College Attendance," NBER Working Papers 22127, National Bureau of Economic Research, Inc.
    17. Rajeev Darolia, 2015. "Income-Tested College Financial Aid and Labor Disincentives," Upjohn Working Papers 15-248, W.E. Upjohn Institute for Employment Research.
    18. Eloïse Corazza & Francesco Filippucci, 2022. "Who Profits from Training Subsidies? Evidence from a French Individual Learning Account," Working Papers halshs-03519664, HAL.

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    More about this item

    Keywords

    Bennett Hypothesis; Student aid incidence; Tax-based federal student aid;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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