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Borrowing Constraints, College Aid, and Intergenerational Mobility

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  • Hanushek, Eric
  • Leung, Charles Ka Yui
  • Yilmaz, Kuzey

Abstract

This paper provides a consistent comparison of general tuition subsidies, need-based student aid, merit-based student aid, and income continent loans (ICL). Each of these policies is analyzed through a dynamic general equilibrium model in which individuals differ in family wealth and opportunities of completing college. The overlapping generation structure of the model permits evaluation of different aid schemes in their implications on the aggregate outcomes, income distribution and intergenerational mobility. Compared to current U.S. tuition and loan policies, the ICL and need-based policies are most effective in promoting the aggregate efficiency and income equality, while merit-based policies are least effective.

Suggested Citation

  • Hanushek, Eric & Leung, Charles Ka Yui & Yilmaz, Kuzey, 2014. "Borrowing Constraints, College Aid, and Intergenerational Mobility," MPRA Paper 54238, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54238
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    More about this item

    Keywords

    need-based student aid; merit-based student aid; income contingent loan; efficiency-equality tradeoff; intergenerational mobility;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General

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