The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics
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.
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The FAFSA includes many difficult-to-answer questions that are relevant only to a very small share of filers.
“For example, the FAFSA includes many difficult-to-answer questions that are relevant only to a very small share of filers (Dynarski & Scott-Clayton, 2006).”
From College Costs, Financial Aid, and Student Decisions (2022) · cites this paper as Dynarski & Scott-Clayton, 2006
Complexity, uncertainty, and delayed timing are barriers to college access and to the effectiveness of financial aid.
“Complexity, uncertainty, and delayed timing are increasingly understood as barriers not only to college access in general, but also to the effectiveness of financial aid specifically (Dynarski & Scott-Clayton, 2006).”
From College Costs, Financial Aid, and Student Decisions (2022) · cites this paper as Dynarski & Scott-Clayton, 2006
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References 21 · Cited by 267
- Authors
- Dynarski, S. M., & Scott-Clayton, J. E.
- Affiliations
- Harvard University (US)
- Corresponding author
- Dynarski, Susan M.
- Venue
- National Tax Journal
- Publisher
- University of Chicago Press
- Published
- 2006-06-01
- Volume
- 59
- Issue
- 2
- Pages
- 319-356
- ISSN
- 0028-0283 (ISSN-L)
- 1944-7477
- OpenAlex
- W3117021088
- Cited by
- 267
- References
- 21
- Citations by year
- 2026: 12 · 2025: 13 · 2024: 16 · 2023: 6 · 2022: 18 · 2021: 15 · 2020: 15 · 2019: 11 · 2018: 16 · 2017: 20 · 2016: 13 · 2015: 21 · 2014: 15 · 2013: 25 · 2012: 15
- FWCI
- 16.85
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- National Tax Journal (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Funders
- Federal Student Aid
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Politics, Economics, and Education Policy
- Social Sciences › Education › Higher Education Research Studies
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
- Keywords
- federal student aid, student financial aid, administrative complexity, behavioral economics, efficiency, equity, redistributive policy, information gathering
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