Sunday, April 30, 2006
Susan Dynarski & Judith Scott-Clayton (both of the John F. Kennedy School of Government at Harvard University) have posted The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics on the Kennesdy School web site. Here is the abstract:
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.