The impact of asset-tested college financial aid on household savings
نویسنده
چکیده
Federal college financial aid imposes an implicit tax on asset accumulation, which reduces the incentive for families to save. Prior literature has found evidence of large reductions in asset accumulation as a result. This paper finds that these conclusions are over-estimated and are sensitive to the assumptions used in estimating the implicit tax rate. Additionally, the 1992 exemption of home equity and other changes in federal policy have substantially eliminated the savings disincentive for many families. Thus, the results of studies that examined families prior to the 1992 changes cannot be applied to the current program. D 2002 Elsevier B.V. All rights reserved. JEL classification: E21; H2; H52; I22
منابع مشابه
An Empirical Examination of the Impact of College Financial Aid on Family Savings
The system of distributing financial aid dollars using needs analysis formulae implicitly imposes a financial aid tax on assets. Existing studies provide mixed evidence of the influence of this implicit tax on assets on wealth accumulation. This paper attempts to contribute to the literature on this topic by examining the sensitivity of results to various assumptions, specifications, and catego...
متن کاملPublic Health Insurance and Private Savings
Recent theoretical work suggests that means and asset-tested social insurance programs can explain the low savings of lower income households in the U.S. We assess the validity of this hypothesis by investigating the effect of Medicaid, the health insurance program for low income women and children, on savings behavior. We do so using data on asset holdings from the Survey of Income and Program...
متن کاملParticipation in Tax-Favored Savings Plans: Are Household Portfolios Optimal?
Since the early nineties, the Dutch tax system allows for a tax-favored form of risk free savings through employer-sponsored savings plans (ESSPs). Under certain conditions and up to a certain amount, the contributions to this plan are tax-deductible, and the returns as well as the withdrawals are tax-free. This makes these plans extremely attractive, with real after-tax returns by far exceedin...
متن کاملTransformation of Household Credit Behavior in the Conditions of Digitalization of the Financial Services Market
Within the article, the impact of modern digitalization processes on changing household credit behavior is considered. Much attention is paid to defining the essence of digitalization and exploring the features of its impact on the financial services market. Accordingly, the content of household credit behavior and its individual models are examined. This behavior is proposed to be considered a...
متن کاملHousehold Asset Allocation, Offspring Education, and the Sandwich Generation
Family size has always been a key factor affecting household investment decision making behavior (Browning 1992). Yet, recently, household financial decision making issues have become even more acute for millions of households that are part of the “Sandwich Generation.” Households with children approaching collegeage are now providing financial support for aging relatives. This combined with th...
متن کامل