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ERIC Number: EJ799100
Record Type: Journal
Publication Date: 2008-Jun
Pages: 23
Abstractor: As Provided
Reference Count: 15
ISSN: ISSN-0964-5292
College Financial Aid Rules and the Allocation of Savings
Reyes, Jessica Wolpaw
Education Economics, v16 n2 p167-189 Jun 2008
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 7-12% 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. (Contains 6 tables and 12 notes.)
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Publication Type: Journal Articles; Reports - Research
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A