Mark Colas, Sebastian Findeisen, Dominik Sachs, 31 October 2020

Need-based financial aid helps underprivileged students in the US attend university. This column combines theoretical and empirical analyses to determine the optimal level of that aid and finds that current aid packages in the US are significantly less need-based than they should be. Not only does need-based financial aid help to reduce inequality, it is also an investment in future tax revenue, making it an optimal subsidy from an efficiency standpoint. In this case, equity and efficiency go hand in hand.

CEPR Policy Research