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Complexity and Targeting in Federal Student Aid: A Quantitative Analysis

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  • Dynarski, Susan

    (Harvard U)

  • Scott-Clayton, Judith

Abstract

A growing body of empirical evidence shows that some financial aid programs increase college enrollment. Puzzlingly, there is little compelling evidence that Pell Grants and Stafford Loans, the primary federal student aid programs, are effective in achieving this goal. In this paper, we provide an in-depth review of this evidence, which taken as a whole suggests that complexity and uncertainty in the federal aid system undermine its efficacy. We document complexity in the aid system, comparing it in particular to complexity in the tax system. We build on our previous work by showing that complexity in the aid process does little to improve the targeting of both student loans and grants, for both dependent and independent students. We conclude that the current targeting of aid can be reproduced with a much simpler aid process. While we show that the targeting benefits of complexity are small, we further document that the costs are large. We offer new estimates of the compliance costs faced by applicants and the administrative costs borne by the government and colleges. These costs total at least $4 billion per year. The perspective of behavioral economics suggests that the true cost is even higher, since complexity and uncertainty may discourage the target population from applying for student aid.

Suggested Citation

  • Dynarski, Susan & Scott-Clayton, Judith, 2008. "Complexity and Targeting in Federal Student Aid: A Quantitative Analysis," Working Paper Series rwp08-005, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp08-005
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    References listed on IDEAS

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    Cited by:

    1. Rodney J. Andrews & Scott A. Imberman & Michael F. Lovenheim, 2016. "Recruiting and Supporting Low-Income, High-Achieving Students at Flagship Universities," NBER Working Papers 22260, National Bureau of Economic Research, Inc.
    2. Hastings, Justine S. & Neilson, Christopher A. & Ramirez, Anely & Zimmerman, Seth D., 2016. "(Un)informed college and major choice: Evidence from linked survey and administrative data," Economics of Education Review, Elsevier, vol. 51(C), pages 136-151.
    3. Gabrielle Fack & Julien Grenet, 2015. "Improving College Access and Success for Low-Income Students: Evidence from a Large Need-Based Grant Program," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 1-34, April.
    4. Toke Reinholt Fosgaard & Lars Gårn Hansen & Erik Wengström, 2011. "Framing and Misperceptions in a Public Good Experiment," IFRO Working Paper 2011/11, University of Copenhagen, Department of Food and Resource Economics, revised Oct 2012.
    5. Booij, Adam S. & Leuven, Edwin & Oosterbeek, Hessel, 2012. "The role of information in the take-up of student loans," Economics of Education Review, Elsevier, vol. 31(1), pages 33-44.
    6. Andrew Christopher Barr & Sarah E. Turner, 2017. "A Letter and Encouragement: Does Information Increase Post-Secondary Enrollment of UI Recipients?," CESifo Working Paper Series 6459, CESifo Group Munich.
    7. Turner, Nicholas, 2011. "The Effect of Tax-Based Federal Student Aid on College Enrollment," National Tax Journal, National Tax Association, vol. 64(3), pages 839-861, September.
    8. Yi, Hongmei & Zhang, Linxiu & Yao, Yezhou & Wang, Aiqin & Ma, Yue & Shi, Yaojiang & Chu, James & Loyalka, Prashant & Rozelle, Scott, 2015. "Exploring the dropout rates and causes of dropout in upper-secondary technical and vocational education and training (TVET) schools in China," International Journal of Educational Development, Elsevier, vol. 42(C), pages 115-123.
    9. Turner, Nicholas, 2010. "The Effect of Tax-Based Federal Student Aid on College Enrollment," University of California at San Diego, Economics Working Paper Series qt6758069g, Department of Economics, UC San Diego.

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • I2 - Health, Education, and Welfare - - Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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