The Effects of Higher Education Tax Benefits and Aid Information on College Decisions Open Access

Abstract

In recent years, tax-based federal aid in the form of the Hope and Lifetime Learning Tax Credits as well as the Tuition Deduction has become a potential funding source for individuals interested in pursuing higher education. This paper analyzes the relationship between post-secondary financial aid distributed through the tax system and the decisions to apply to college, enroll in college, and complete a year of college for dependents between the ages of 18 and 23. Using policy variations in income and benefit limits to estimate the aid's effects, this study finds that the amount of tax benefit an individual is eligible to receive does not increase the probability that an individual decides to apply to college, enroll in college, or a complete a year of college. However, receipt of financial aid information was found to have economically and statistically significant effects for the three college decisions studied, with an associated increase in the probability of enrolling equivalent to 8.5 percentage points, an increase in the probability of applying equivalent to 27 percentage points, and an increase in the probability of completing a year of college equivalent to 17 percentage points. High frequency of discussions with parents about college attendance also resulted in significant increases in the probabilities analyzed in this paper.

Table of Contents

I. Introduction……………………..….……………………….…….….........1

II. Program Details……………….….………………………...…...….......2

Table 1…………………………………….….…………..………………….…...….5

Table 2…………………………………….….……………..……………….…...….6

Table 3…………………………………….….………..…………………….….….…7

Graph 1……………………………………….…….……………………….….…....8

III. Literature Review……………..….……………………………….……...9

IV. Data and Income Construction……………………………........12

V. Empirical Strategy…………………………………..…………………....15

VI. Results and Discussion………………………………….…….........22

Enroll………………………………………………………………………….........22

Apply…….…………………………………………………………………..........25

Complete……………………………………………………………….....……...27

Control Variables…………………………………………………..………....28

VII. Conclusion…………………………………………………….…………...29

VIII. References………………………………………………………..……..33

IX. Appendix……………………………………………………………………..35

Table 4………………………………………………………………………….....35

Table 5………………………………………………………………………….....36

Table 6………………………………………………………………………….....38

Table 7………………………………………………………………………….....39

Table 8………………………………………………………………………….....40

Table 9………………………………………………………………………….....41

Graph 2…………………………………………………………………………....42

About this Honors Thesis

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School	Emory College
Department	Economics and Mathematics
Degree	BA
Submission	Honors Thesis
Language	English
Research Field	Economics, General
Keyword	tax education financial aid
Committee Chair / Thesis Advisor	Frisvold, David, Emory University
Committee Members	Powers, Victoria, Emory University Rubinson, Richard, Emory University

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