IDEAS home Printed from https://ideas.repec.org/a/taf/edecon/v16y2008i2p167-189.html
   My bibliography  Save this article

College financial aid rules and the allocation of savings

Author

Listed:
  • Jessica Wolpaw Reyes

Abstract

The college financial aid system imposes an implicit asset tax that is prevalent and substantial. Facing this tax, rational families should reduce their total assets and shelter assets in protected categories. I find that the tax induces a 7-12% reduction in total assets, a result in line with the literature. Furthermore, I find evidence that families reallocate assets into sheltered retirement accounts. The paper provides further evidence that the financial aid tax reduces asset accumulation and prompts a reconsideration of the simple 'higher tax, lower assets' story. It provides the first evidence that families may be engaging in a rational reallocation of their asset portfolio.

Suggested Citation

  • Jessica Wolpaw Reyes, 2008. "College financial aid rules and the allocation of savings," Education Economics, Taylor & Francis Journals, vol. 16(2), pages 167-189.
  • Handle: RePEc:taf:edecon:v:16:y:2008:i:2:p:167-189
    DOI: 10.1080/09645290701383605
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/09645290701383605
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/09645290701383605?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dynarski, Susan M. & Scott–Clayton, Judith E., 2006. "The Cost of Complexity in Federal Student Aid: Lessons From Optimal Tax Theory and Behavioral Economics," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 319-356, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kristy Fan & Tyler J. Fisher & Andrew A. Samwick, 2021. "The Insurance Value of Financial Aid," NBER Working Papers 28669, National Bureau of Economic Research, Inc.
    2. Catherine A. Manly & Ryan S. Wells & Genia M. Bettencourt, 2017. "Financial Planning for College: Parental Preparation and Capital Conversion," Journal of Family and Economic Issues, Springer, vol. 38(3), pages 421-438, September.
    3. Rajeev Darolia, 2015. "Income-Tested College Financial Aid and Labor Disincentives," Upjohn Working Papers 15-248, W.E. Upjohn Institute for Employment Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Darolia, Rajeev, 2013. "Integrity versus access? The effect of federal financial aid availability on postsecondary enrollment," Journal of Public Economics, Elsevier, vol. 106(C), pages 101-114.
    2. Damgaard, Mette Trier & Nielsen, Helena Skyt, 2018. "Nudging in education," Economics of Education Review, Elsevier, vol. 64(C), pages 313-342.
    3. Dynarski, Susan & Wiederspan, Mark, 2012. "Student Aid Simplification: Looking Back and Looking Ahead," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(1), pages 211-234, March.
    4. Philippe Belley & Lance Lochner, 2007. "The Changing Role of Family Income and Ability in Determining Educational Achievement," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 37-89.
    5. Hemelt, Steven W. & Marcotte, Dave E., 2008. "Rising Tuition and Enrollment in Public Higher Education," IZA Discussion Papers 3827, Institute of Labor Economics (IZA).
    6. Jesse Rothstein & Albert Yoon, 2006. "Mismatch in Law School," Working Papers 29, Princeton University, School of Public and International Affairs, Education Research Section..
    7. Michael S. Kofoed, 2022. "Pell Grants and Labor Supply: Evidence from a Regression Kink," Upjohn Working Papers 22-363, W.E. Upjohn Institute for Employment Research.
    8. George B. Bulman & Caroline M. Hoxby, 2015. "The Returns to the Federal Tax Credits for Higher Education," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 13-88.
    9. Philip Oreopoulos & Ryan Dunn, 2013. "Information and College Access: Evidence from a Randomized Field Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(1), pages 3-26, January.
    10. Avery, Christopher & Castleman, Benjamin L. & Hurwitz, Michael & Long, Bridget Terry & Page, Lindsay C., 2021. "Digital messaging to improve college enrollment and success," Economics of Education Review, Elsevier, vol. 84(C).
    11. Iriti, Jennifer & Page, Lindsay C. & Bickel, William E., 2018. "Place-based scholarships: Catalysts for systems reform to improve postsecondary attainment," International Journal of Educational Development, Elsevier, vol. 58(C), pages 137-148.
    12. Andrews, Rodney J. & Imberman, Scott A. & Lovenheim, Michael F., 2020. "Recruiting and supporting low-income, high-achieving students at flagship universities," Economics of Education Review, Elsevier, vol. 74(C).
    13. Celeste K. Carruthers & Jilleah G. Welch, 2015. "Not Whether, but Where? Pell Grants and College Choices," Working Papers 2015-04, University of Tennessee, Department of Economics, revised 28 Sep 2015.
    14. Foote, Andrew, 2022. "Comparing earnings outcome differences between all graduates and title IV graduates," Economics of Education Review, Elsevier, vol. 89(C).
    15. Susan Dynarski & Judith Scott-Clayton & Mark Wiederspan, 2013. "Simplifying Tax Incentives and Aid for College: Progress and Prospects," NBER Chapters, in: Tax Policy and the Economy, Volume 27, pages 161-201, National Bureau of Economic Research, Inc.
    16. Taylor K. Odle & Jennifer A. Delaney, 2022. "You are Admitted! Early Evidence on Enrollment from Idaho’s Direct Admissions System," Research in Higher Education, Springer;Association for Institutional Research, vol. 63(6), pages 899-932, September.
    17. Robert French & Philip Oreopoulos, 2017. "Applying behavioural economics to public policy in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(3), pages 599-635, August.
    18. Alina Martinez & Tamara Linkow & Hannah Miller & Amanda Parsad & Cristofer Price, "undated". "Study of College Transition Messaging in GEAR UP: Impacts on Enrolling and Staying in College," Mathematica Policy Research Reports c6113480c8134325ac685ddd9, Mathematica Policy Research.
    19. Laura M. Crispin & Michael Kofoed, 2019. "Does Time To Work Limit Time To Play?: Estimating A Time Allocation Model For High School Students By Household Socioeconomic Status," Contemporary Economic Policy, Western Economic Association International, vol. 37(3), pages 524-544, July.
    20. Mangrum, Daniel, 2022. "Personal finance education mandates and student loan repayment," Journal of Financial Economics, Elsevier, vol. 146(1), pages 1-26.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:edecon:v:16:y:2008:i:2:p:167-189. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CEDE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.