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College Financial Aid Application Frictions

Author

Listed:
  • Emily G. Moschini
  • Gajendran Raveendranathan

Abstract

Weshowthat 11 percent of recent US high school graduates did not apply for fed eral financial aid due to mistakenly believing themselves ineligible or finding applying too difficult. Not applying for aid due to these frictions negatively predicts bachelor’s degree enrollment, even after controlling for other attributes. We embed aid applica tion frictions into a structural model of college enrollment where federal financial aid is determined by the Expected Family Contribution formula. We find that the welfare costs of aid application frictions for affected non-enrollees amounts to 0.5 percent of lifetime consumption and leisure. General equilibrium effects magnify these losses.

Suggested Citation

  • Emily G. Moschini & Gajendran Raveendranathan, 2024. "College Financial Aid Application Frictions," Department of Economics Working Papers 2024-10, McMaster University.
    • Handle: RePEc:mcm:deptwp:2024-10
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics
    • G5 - Financial Economics - - Household Finance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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