Optimal need-based financial aid

Arbeitspapier

We study the optimal design of student financial aid as a function of parental income. We derive optimal financial aid formulas in a general model. For a simple model version, we derive mild conditions on primitives under which poorer students receive more aid even without distributional concerns. We quantitatively extend this result to an empirical model of selection into college for the United States that comprises multidimensional heterogeneity, endogenous parental transfers, dropout, labor supply in college, and uncertain returns. Optimal financial aid is strongly declining in parental income even without distributional concerns. Equity and efficiency go hand in hand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 225

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Educational Finance; Financial Aid ; Education and Inequality ; Education: Government Policy
• Subject: Financial Aid ; College Subsidies ; Optimal Taxation ; Inequality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Colas, Mark ; Findeisen, Sebastian ; Sachs, Dominik
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (where): München und Berlin
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/222122
• Last update: 10.03.2025, 11:43 AM CET