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The Implicit Taxes from College Financial Aid

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Author Info
Andrew W. Dick
Aaron S. Edlin

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Abstract

Families who heed the 'experts'' advice and save for their children's college education typically receive less financial aid. The variation in the net price of college functions as a large tax on savings. College financial aid also functions as an income tax. This paper estimates the size and determinants of these income and asset taxes. We find that the marginal income tax typically ranges from 2% to 16% and the marginal asset levy from somewhat under 10% to as high as 25%. If a typical family chooses to accumulate $100,000 in assets rather than consuming these resources, it loses financial aid worth $10,000-$20,000.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5316.

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Date of creation: Oct 1995
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Handle: RePEc:nbr:nberwo:5316

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  1. Edlin, Aaron S, 1993. "Is College Financial Aid Equitable and Efficient?," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 143-58, Spring. [Downloadable!] (restricted)
  2. Feldstein, Martin, 1995. "College Scholarship Rules and Private Saving," American Economic Review, American Economic Association, vol. 85(3), pages 552-66, June. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luisa Lambertini, 2001. "Technological Change and Public Financing of Education," Boston College Working Papers in Economics 579, Boston College Department of Economics. [Downloadable!]
  2. Rebecca J. Acosta, 2001. "How Do Colleges Respond to Changes in Federal Student Aid?," UCLA Economics Working Papers 808, UCLA Department of Economics. [Downloadable!]
  3. William M. Gentry & R. Glenn Hubbard, 2002. "The Effects of Progressive Income Taxation on Job Turnover," NBER Working Papers 9226, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Annamaria Lusardi & Ricardo Daniel Cossa & Erin L. Krupka, 2001. "Savings of Young Parents," JCPR Working Papers 229, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Tansel Yilmazer, 2008. "Saving for Children’s College Education: An Empirical Analysis of the Trade-off Between the Quality and Quantity of Children," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 307-324, June. [Downloadable!] (restricted)
  6. Annamaria Lusardi & Ricardo Cossa & Erin L. Krupka, 2000. "Savings of young parents," Working Paper Series WP-00-23, Federal Reserve Bank of Chicago. [Downloadable!]
  7. Casey B. Mulligan, 2008. "A Depressing Scenario: Mortgage Debt Becomes Unemployment Insurance," NBER Working Papers 14514, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. repec:bep:eapcon:v:2:y:2003:i:1:p:1044-1044 is not listed on IDEAS
  9. Casey B. Mulligan, 2009. "Means-Tested Mortgage Modification: Homes Saved or Income Destroyed?," NBER Working Papers 15281, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Susan M. Dynarski, 2004. "Who Benefits from the Education Saving Incentives? Income, Educational Expectations, and the Value of the 529 and Coverdell," NBER Working Papers 10470, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. repec:bep:eaptop:v:7:y:2007:i:1:p:1605-1605 is not listed on IDEAS
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