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Borrowing Constraints, College Aid, and Intergenerational Mobility

  • Hanushek, Eric
  • Leung, Charles Ka Yui
  • Yilmaz, Kuzey

This paper provides a consistent comparison of general tuition subsidies, need-based student aid, merit-based student aid, and income continent loans (ICL). Each of these policies is analyzed through a dynamic general equilibrium model in which individuals differ in family wealth and opportunities of completing college. The overlapping generation structure of the model permits evaluation of different aid schemes in their implications on the aggregate outcomes, income distribution and intergenerational mobility. Compared to current U.S. tuition and loan policies, the ICL and need-based policies are most effective in promoting the aggregate efficiency and income equality, while merit-based policies are least effective.

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File URL: http://mpra.ub.uni-muenchen.de/54238/1/MPRA_paper_54238.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 54238.

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Date of creation: Mar 2014
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Handle: RePEc:pra:mprapa:54238
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