The Implicit Taxes from College Financial Aid

Andrew W. Dick and Aaron Edlin ()

No 5316, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Families who heed the 'experts'' advice and save for their children's college education typically receive less financial aid. The variation in the net price of college functions as a large tax on savings. College financial aid also functions as an income tax. This paper estimates the size and determinants of these income and asset taxes. We find that the marginal income tax typically ranges from 2% to 16% and the marginal asset levy from somewhat under 10% to as high as 25%. If a typical family chooses to accumulate $100,000 in assets rather than consuming these resources, it loses financial aid worth $10,000-$20,000.

Date: 1995-10
Note: PE
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Journal Article: The implicit taxes from college financial aid (1997)
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