Full Citation

Title: COLLEGE FINANCIAL AID RULES AND THE ALLOCATION OF SAVINGS

Citation Type: Miscellaneous

Publication Year: 2007

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: The college financial aid system imposes an implicit asset tax that is prevalent and substantial. Facing this tax, rational families should reduce their total assets and shelter assets in protected categories. I find that the tax induces a 7 to 12% reduction in total assets, a result in line with the literature. Furthermore, I find evidence that families reallocate assets into sheltered retirement accounts. The paper provides further evidence that the financial aid tax reduces asset accumulation and prompts a reconsideration of the simple "higher tax, lower assets" story. It provides the first evidence that families may be engaging in a rational reallocation of their asset portfolio.

Url: http://www3.amherst.edu/~jwreyes/papers/FinAidPaper.pdf

User Submitted?: No

Authors: Reyes, Jessica Wolpaw

Publisher: Amherst College

Data Collections: IPUMS USA

Topics: Education

Countries: United States