Who benefits from student aid? The economic incidence of tax-based federal student aid

Nicholas Turner

Economics of Education Review, 2012, vol. 31, issue 4, 463-481

Abstract: Federal benefit programs, including federal student aid, are designed to aid targeted populations. Behavioral responses to these programs may alter the incidence of their benefits, a possibility that receives less attention in the literature compared to tax incidence. I demonstrate the importance of benefit incidence analysis by showing that the intended cost reductions of tax-based federal student aid are substantially offset by institutional price increases for a sample of 4-year colleges and universities. Contrary to the goal of policymakers, I find that tax-based aid crowds out institutional aid roughly dollar-for-dollar. Unfortunately, it is not clear how institutions utilize these captured resources, so that the ultimate incidence of the programs is uncertain.

Keywords: Bennett Hypothesis; Student aid incidence; Tax-based federal student aid (search for similar items in EconPapers)
JEL-codes: H22 I22 I28 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:31:y:2012:i:4:p:463-481

DOI: 10.1016/j.econedurev.2011.12.008

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