Estimating Effective Subsidy Rates of Student Aid Programs
Every year millions of high school students and their parents in the US are asked to fill out complicated financial aid application forms. However, few studies have estimated the responsiveness of government financial aid schemes to changes in financial needs of the students. This paper identifies the effective subsidy rate (ESR) of student aid, as defined by the coefficient of financial needs in the regression of financial aid. The ESR measures the proportion of subsidy of student aid under the assumption that all students who enroll in college apply for financial aid. Problems of self-selected applications are considerable because more than one-third of financial aid applicants are ineligible for any form of financial aid; and because about 10 percent of financially needy students do not apply. I cope with endogenous applications by estimating a Tobit-with-Selection model using maximum likelihood estimation methods. The results show that conventional OLS estimates considerably understate the ESR because a large portion of applicants are from high-income families with no financial needs and are ineligible for any form of aid. My finding suggests that it is important to include endogenous applications for financial aid in evaluations of student aid programs.
Volume (Year): (2008)
Issue (Month): 91-92 ()
|Contact details of provider:|| Postal: |
Web page: http://annales.ensae.fr/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:adr:anecst:y:2008:i:91-92:p:18. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Gary-Bobo)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.