Need-Based Financial Aid Distorts College Savings . .

July 2004
Journal of Financial Planning;Jul2004, Vol. 17 Issue 7, p20
Academic Journal
This article reports that financial aid formulas and taxes distort how U.S. families save for college, and in some cases savings can make them worse off than if they had not saved at all, according to the thesis of a National Bureau of Economic Research working paper by Susan Dynarski. Dynarski calculated how much financial aid was lost for each dollar saved in various savings vehicles. The findings of Dynarski include that 15 cents for each dollar saved in a 529 plan, 26 to 39 cents in an individual retirement account, and 40 cents in a mutual fund, $1.24 for each dollar held in a Uniform Transfer to Minors Act account. Dynarski also calculated that Coverdell education savings accounts lost $1.22 per dollar saved, which was before the federal government ruled that ESA would receive the same treatment as 529 plans when determining federal student aid. In a statement issued by Dynarski, arbitrary tax variations undermine the goals of need-based aid, and that families with identical financial positions receive very different levels of aid, depending on whether they are savvy enough to steer their savings toward the right vehicles.


Related Articles

  • Governors Urge Students to Apply for $790 Million in New Grants.  // PA Times;Sep2006, Vol. 29 Issue 9, p22 

    The article reports on the $790 million academic competitiveness and the national science and mathematics access to retain talent grants in the U.S. Such grants provide opportunity to make college education more affordable and to reward students who have worked hard. Moreover, the grants provide...

  • THE BETTER WAYS TO WIN A GRANT. Carnow, Gary A. // Tech & Learning;Jul2008, Vol. 28 Issue 12, p31 

    The article offers tips on how to win an educational grant. These include finding a brighter idea through becoming proactive at identifying needs, organizing in a proper way, preparing an elevator speech, getting support from a group, setting a watch, filling in the holes, judging for yourself,...

  • £10m drive to help NEETs in Scotland.  // Children & Young People Now (Haymarket Business Publications Ltd;2/6/2008, p6 

    The article reports on the launching of Inspiring Scotland program developed by Scotland-based grant-giving body Lloyds TSB Foundation for Foundation. The program is aimed help young people not in education, employment or training (NEET) across Scotland, by spending £10 million a year for the...

  • New Pell Grant Formula Would Yield Less for Many. Pekow, Charles // Community College Week;5/23/2005, Vol. 17 Issue 21, p9 

    Reports on the decline in the amount of funds offered by the Pell Grant program to students following the move of the U.S. Department of Education to update the program's formula. Estimated number of people who will lose eligibility for the grants; Impact of the decline in the amount of funds...

  • Untitled.  // Education Digest;Jan1937, Vol. 2 Issue 5, p29 

    The article reports on a prepayment plan, under which parents can begin financing their children's college education at birth, instituted at Bucknell University in Philadelphia, Pennsylvania. According to the university, prepayments will be invested and the net interest will be credited to the...

  • DELOITTE FOUNDATION ANNOUNCES 2006 GRANTS.  // Accounting Today;4/17/2006, Vol. 20 Issue 7, p5 

    Announces the recipients of the 2006 Doctoral Fellowship Program grants provided by Deloitte Foundation. List of students who will receive the grant; Amount to be received by each recipient; People included in the independent selection committee that chose the recipients.

  • Are Your College Savings Plans on Track?  // Stonewall County Courier (Aspermont, TX);9/14/2006, Vol. 20 Issue 45, p3 

    The article focuses on the two college savings vehicles offered in the U.S. One is the Coverdell Education Savings Account. Depending on one's income level, he can contribute up to $2,000 annually to this educational plan. His earnings and withdrawals will be tax-free provided he uses the money...

  • DEBATE OVER PELL GRANTS. Byrd, Nicole M. // Academe;Mar/Apr2007, Vol. 93 Issue 2, p6 

    This article focuses on a debate over Pell Grants. The higher education community was pleased when it appeared that the U.S. administration and the Democratic congressional leadership were in agreement on the need to increase the award limit on Pell Grants. After years of the award amount...

  • UNDERSTANDING THE AID FORM. Davis, Kristin // U.S. News & World Report;9/6/2004, Vol. 137 Issue 7, p71 

    Answers questions about filling out the Free Application for Federal Student Aid, or FAFSA. Who is eligible to file; Advantages of filing online; Deadlines; What confuses people about the forms; The expected family contribution, or EFC; The Student Aid Report; Verification of numbers;...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics