Year: 2003
Type: article
Abstract: When parents save money for their children's college education, a portion of their savings is later taken away in the form of reduced eligibility for college financial aid.We estimate the longrun impact of this implicit asset tax by estimating family preferences over life-cycle consumption, savings and college choices and then simulating family choices over these variables under various hypothetical financial aid systems with different asset treatments.Our simulations suggest that the implicit taxes in the current college financial aid system may in the long run reduce economy-wide asset holdings in the U.S. by $186 billion versus aid systems with no implicit asset taxes.This figure is less than 1% of total U.S. wealth during the years of our data.It, however, reflects a 10.2% reduction is asset holdings for affected families.
Authors: Aaron S. Edlin, Andrew W. Dick, Eric R. Emch
Institutions: Bepress (United States), United States Department of Justice
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1503993538