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Abstract

It can be argued that the public investment in student financial aid should be evaluated based on the tax revenue returns that result from this investment. While this is not the only basis on which student aid can be justified in the budget process, this approach does have merit, especially given the large federal deficit. This article develops a model for estimating the tax revenue returns from gains in educational attainment that are attributable to student financial aid. This study examines the impact of student aid on access and persistence. It is estimated that the net present value of the tax returns on each dollar of federal expenditures on student aid for students in the high school class of 1980 was $4.30, using reasonable economic assumptions. The authors conclude that student financial aid generates a positive return to the federal budget, a research finding that merits consideration in the budget process.

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