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

  • Turner, Nicholas
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    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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    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. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    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. Helena Skyt Nielsen & Torben Sørensen & Christopher R. Taber, 2008. "Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform," NBER Working Papers 14535, National Bureau of Economic Research, Inc.
    4. Susan Dynarski & Judith E. Scott-Clayton, 2008. "Complexity and Targeting in Federal Student Aid: A Quantitative Analysis," NBER Working Papers 13801, National Bureau of Economic Research, Inc.
    5. repec:mpr:mprres:3250 is not listed on IDEAS
    6. Neil Seftor Sarah E Turner, 2002. "Back to School Federal Student Aid Policy and Adult College Enrollment," Mathematica Policy Research Reports 28f7ccb624fd4f2a9a20d7075, Mathematica Policy Research.
    7. Sara LaLumia, 2010. "Tax Preferences for Higher Education and Adult College Enrollment," Department of Economics Working Papers 2010-09, Department of Economics, Williams College.
    8. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
    9. 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.
    10. 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.
    11. 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.
    12. Damon Jones, 2010. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds," NBER Working Papers 15963, National Bureau of Economic Research, Inc.
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