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The Effect Of Tax-Based Federal Student Aid On College Enrollment

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  • Turner, Nicholas
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    Abstract

    Tax-based federal student aid — the Hope Tax Credit, Lifetime Learning Tax Credit, and Tuition Deduction — marks a new paradigm for federal aid by offering tax incentives for postsecondary enrollment for the middle class. I exploit policy-induced variation in tax-based aid eligibility to estimate its causal effect on college enrollment. I find that tax-based aid increases full-time enrollment in the first two years of college for 18 to 19 years old by 7 percent. The price sensitivity of enrollment suggests that college enrollment increases 0.3 percentage points per $100 of taxbased aid. The programs do not appear to substantively affect part-time enrollment in the first two years of college.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 64 (2011)
    Issue (Month): 3 (September)
    Pages: 839-61

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    Handle: RePEc:ntj:journl:v:64:y:2011:i:3:p:839-61

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    1. Dynarski, Susan & Scott-Clayton, Judith, 2008. "Complexity and Targeting in Federal Student Aid: A Quantitative Analysis," Working Paper Series rwp08-005, Harvard University, John F. Kennedy School of Government.
    2. Kane, Thomas J, 1994. "College Entry by Blacks since 1970: The Role of College Costs, Family Background, and the Returns to Education," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 878-911, October.
    3. Nielsen, Helena Skyt & Sørensen, Torben & Taber, Christopher, 2008. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," IZA Discussion Papers 3785, Institute for the Study of Labor (IZA).
    4. Jesse Rothstein & Cecilia Elena Rouse, 2007. "Constrained After College: Student Loans and Early Career Occupational Choices," NBER Working Papers 13117, National Bureau of Economic Research, Inc.
    5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
    6. Damon Jones, 2010. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds," NBER Working Papers 15963, National Bureau of Economic Research, Inc.
    7. Thomas J. Kane, 2003. "A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going," NBER Working Papers 9703, National Bureau of Economic Research, Inc.
    8. Neil S. Seftor & NSarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 336-352.
    9. Eric P. Bettinger & Bridget Terry Long & Philip Oreopoulos & Lisa Sanbonmatsu, 2009. "The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment," NBER Working Papers 15361, National Bureau of Economic Research, Inc.
    10. Sara LaLumia, 2010. "Tax Preferences for Higher Education and Adult College Enrollment," Department of Economics Working Papers 2010-09, Department of Economics, Williams College.
    11. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
    12. Neil S. Seftor & Sarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Mathematica Policy Research Reports 3250, Mathematica Policy Research.
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    Cited by:
    1. Dayanand S. Manoli & Nicholas Turner, 2014. "Cash-on-Hand & College Enrollment: Evidence from Population Tax Data and Policy Nonlinearities," NBER Working Papers 19836, National Bureau of Economic Research, Inc.
    2. Bednar, Steven & Gicheva, Dora, 2013. "Tax benefits for graduate education: Incentives for whom?," Economics of Education Review, Elsevier, vol. 36(C), pages 181-197.

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