IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/14966.html
   My bibliography  Save this book chapter

How Much Can Families Afford to Pay for College?

In: Financing Institutions of Higher Education

Author

Listed:
  • Peter Hinrichs

Abstract

This paper studies families’ capacity to pay for college in the United States, focusing on changes over time and differences by race and socioeconomic status. I use data from the National Postsecondary Student Aid Study (NPSAS) to document changes over time in the Expected Family Contribution (EFC) from the Free Application for Federal Student Aid (FAFSA). The results suggest that the EFC has been rising over time, and that this has been driven primarily by families in the upper quartile of the income distribution. I then use data from the Panel Study of Income Dynamics (PSID) to calculate alternative measures of the ability to pay for college. I find that it is possible to alter the distribution of who pays what amount by changing details of the EFC calculation, but the extent of this depends on details of the implementation.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Peter Hinrichs, 2024. "How Much Can Families Afford to Pay for College?," NBER Chapters, in: Financing Institutions of Higher Education, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14966
    as

    Download full text from publisher

    File URL: http://www.nber.org/chapters/c14966.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 225-256, July.
    2. Ralph Stinebrickner & Todd Stinebrickner, 2008. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, American Economic Association, vol. 98(5), pages 2163-2184, December.
    3. Michael F. Lovenheim & C. Lockwood Reynolds, 2013. "The Effect of Housing Wealth on College Choice: Evidence from the Housing Boom," Journal of Human Resources, University of Wisconsin Press, vol. 48(1), pages 1-35.
    4. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    5. V. Joseph Hotz & Emily E. Wiemers & Joshua Rasmussen & Kate Maxwell Koegel, 2018. "The Role of Parental Wealth and Income in Financing Children's College Attendance and Its Consequences," NBER Working Papers 25144, National Bureau of Economic Research, Inc.
    6. Phillip B. Levine & Dubravka Ritter, 2024. "The racial wealth gap, financial aid, and college access," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(2), pages 555-581, March.
    7. George Bulman & Robert Fairlie & Sarena Goodman & Adam Isen, 2021. "Parental Resources and College Attendance: Evidence from Lottery Wins," American Economic Review, American Economic Association, vol. 111(4), pages 1201-1240, April.
    8. Daniel Ringo, 2019. "Parental Credit Constraints and Child College Attendance," Education Finance and Policy, MIT Press, vol. 14(4), pages 548-571, Fall.
    9. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1553-1623.
    10. Constantine Yannelis & Greg Tracey, 2022. "Student Loans and Borrower Outcomes," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 167-186, November.
    11. Meta Brown & John Karl Scholz & Ananth Seshadri, 2012. "A New Test of Borrowing Constraints for Education," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 511-538.
    12. Zachary Bleemer, 2022. "Affirmative Action, Mismatch, and Economic Mobility after California’s Proposition 209," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(1), pages 115-160.
    13. Susan Dynarski & Lindsay C. Page & Judith Scott-Clayton, 2022. "College Costs, Financial Aid, and Student Decisions," NBER Working Papers 30275, National Bureau of Economic Research, Inc.
    14. Peter Hinrichs, 2012. "The Effects of Affirmative Action Bans on College Enrollment, Educational Attainment, and the Demographic Composition of Universities," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 712-722, August.
    15. Jonathan Smith & Joshua Goodman & Michael Hurwitz, 2020. "The Economic Impact of Access to Public Four-Year Colleges," NBER Working Papers 27177, National Bureau of Economic Research, Inc.
    16. Seth D. Zimmerman, 2014. "The Returns to College Admission for Academically Marginal Students," Journal of Labor Economics, University of Chicago Press, vol. 32(4), pages 711-754.
    17. Rucker C. Johnson, 2020. "The Impact of Parental Wealth on College Degree Attainment: Evidence from the Housing Boom and Bust," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 405-410, May.
    18. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
    19. Sarah R. Cohodes & Joshua S. Goodman, 2014. "Merit Aid, College Quality, and College Completion: Massachusetts' Adams Scholarship as an In-Kind Subsidy," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 251-285, October.
    20. Mark C. Long, 2004. "Race and College Admissions: An Alternative to Affirmative Action?," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 1020-1033, November.
    21. Michael F. Lovenheim, 2011. "The Effect of Liquid Housing Wealth on College Enrollment," Journal of Labor Economics, University of Chicago Press, vol. 29(4), pages 741-771.
    22. Raj Chetty & David J. Deming & John N. Friedman, 2023. "Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges," NBER Working Papers 31492, National Bureau of Economic Research, Inc.
    23. Peter Arcidiacono, 2005. "Affirmative Action in Higher Education: How Do Admission and Financial Aid Rules Affect Future Earnings?," Econometrica, Econometric Society, vol. 73(5), pages 1477-1524, September.
    24. Aaron S. Edlin, 1993. "Is College Financial Aid Equitable and Efficient?," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 143-158, Spring.
    25. Philip Oreopoulos & Kjell G. Salvanes, 2011. "Priceless: The Nonpecuniary Benefits of Schooling," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 159-184, Winter.
    26. Philip Oreopoulos & Uros Petronijevic, 2013. "Making College Worth It: A Review of Research on the Returns to Higher Education," NBER Working Papers 19053, National Bureau of Economic Research, Inc.
    27. Dick, Andrew W. & Edlin, Aaron S., 1997. "The implicit taxes from college financial aid," Journal of Public Economics, Elsevier, vol. 65(3), pages 295-322, September.
    28. Stephen Teng Sun & Constantine Yannelis, 2016. "Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 12-24, March.
    29. Souleles, Nicholas S., 2000. "College tuition and household savings and consumption," Journal of Public Economics, Elsevier, vol. 77(2), pages 185-207, August.
    30. Mark Hoekstra, 2009. "The Effect of Attending the Flagship State University on Earnings: A Discontinuity-Based Approach," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 717-724, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Carter Braxton & Nisha Chikhale & Kyle F. Herkenhoff & Gordon M. Phillips, 2024. "Intergenerational Mobility and Credit," NBER Working Papers 32031, National Bureau of Economic Research, Inc.
    2. Jeffrey T. Denning, 2019. "Born under a Lucky Star: Financial Aid, College Completion, Labor Supply, and Credit Constraints," Journal of Human Resources, University of Wisconsin Press, vol. 54(3), pages 760-784.
    3. Steven J. Haider & Kathleen McGarry, 2018. "Postsecondary Schooling and Parental Resources: Evidence from the PSID and HRS," Education Finance and Policy, MIT Press, vol. 13(1), pages 72-96, Winter.
    4. George Bulman & Robert Fairlie & Sarena Goodman & Adam Isen, 2021. "Parental Resources and College Attendance: Evidence from Lottery Wins," American Economic Review, American Economic Association, vol. 111(4), pages 1201-1240, April.
    5. Peter Arcidiacono & Michael Lovenheim, 2016. "Affirmative Action and the Quality-Fit Trade-Off," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 3-51, March.
    6. Daniel Ringo, 2019. "Parental Credit Constraints and Child College Attendance," Education Finance and Policy, MIT Press, vol. 14(4), pages 548-571, Fall.
    7. Uta Bolt & Eric French & Jamie Hentall-MacCuish & Cormac O'Dea, 2021. "The intergenerational elasticity of earnings: exploring the mechanisms," IFS Working Papers W21/07, Institute for Fiscal Studies.
    8. Andrews, Rodney J. & Imberman, Scott A. & Lovenheim, Michael F., 2020. "Recruiting and supporting low-income, high-achieving students at flagship universities," Economics of Education Review, Elsevier, vol. 74(C).
    9. Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2021. "Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 361-395.
    10. Gurgand, Marc & Lorenceau, Adrien & Mélonio, Thomas, 2023. "Student loans: Credit constraints and higher education in South Africa," Journal of Development Economics, Elsevier, vol. 161(C).
    11. Daniel Aaronson & Daniel Hartley & Bhashkar Mazumder, 2021. "The Effects of the 1930s HOLC "Redlining" Maps," American Economic Journal: Economic Policy, American Economic Association, vol. 13(4), pages 355-392, November.
    12. Jeffrey T. Denning & Todd R. Jones, 2021. "Maxed Out?: The Effect of Larger Student Loan Limits on Borrowing and Education Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 56(4), pages 1113-1140.
    13. Jo Blanden & Matthias Doepke & Jan Stuhler, 2022. "Education inequality," CEP Discussion Papers dp1849, Centre for Economic Performance, LSE.
    14. Cecilia Machado & Germ'an Reyes & Evan Riehl, 2023. "The Direct and Spillover Effects of Large-scale Affirmative Action at an Elite Brazilian University," Papers 2305.02513, arXiv.org, revised Jun 2023.
    15. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    16. Ghazala Azmat & Jack Britton, 2024. "Labour Market Returns to Higher Education," Post-Print hal-04709561, HAL.
    17. Phillip B. Levine & Dubravka Ritter, 2024. "The racial wealth gap, financial aid, and college access," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 43(2), pages 555-581, March.
    18. Jeffrey T. Denning & Benjamin M. Marx & Lesley J. Turner, 2019. "ProPelled: The Effects of Grants on Graduation, Earnings, and Welfare," American Economic Journal: Applied Economics, American Economic Association, vol. 11(3), pages 193-224, July.
    19. Lance Lochner & Alexander Monge-Naranjo, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis.
    20. Christopher Rauh, 2015. "The Political Economy of Early and College Education - Can Voting Bend the Great Gatsby Curve?," 2015 Meeting Papers 82, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:14966. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.