TY  - JOUR
AU  - Dynarski,Susan M.
AU  - Scott-Clayton,Judith E.
TI  - The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12227
PY  - 2006
Y2  - May 2006
UR  - http://www.nber.org/papers/w12227
L1  - http://www.nber.org/papers/w12227.pdf
N1  - Author contact info:
Susan Dynarski
University of Michigan
Weill Hall
735 South State Street
Ann Arbor, MI 48109-3091
Tel: 734 615 5113
Fax: NA
E-Mail: dynarski@umich.edu

Judith Scott-Clayton
Teachers College
Columbia University
525 W.120th Street, Box 174
New York, NY 10027
Tel: 212/678-3478
Fax: 212/678-3699
E-Mail: scott-clayton@tc.columbia.edu
M2  - featured in NBER digest on 2006-05-15
AB  - The federal system for distributing student financial aid rivals the tax code in its complexity. Both have been a source of frustration and a focus of reform efforts for decades, yet the complexity of the student aid system has received comparatively little attention from economists. We describe the complexity of the aid system, and apply lessons from optimal tax theory and behavioral economics to show that complexity is a serious obstacle to both efficiency and equity in the distribution of student aid. We show that complexity disproportionately burdens those with the least ability to pay and undermines redistributive goals. We use detailed data from federal student aid applications to show that a radically simplified aid process can reproduce the current distribution of aid using a fraction of the information now collected.
ER  -