4Complexity and Targeting in Federal Student Aid: A Quantitative Analysis

A growing body of empirical evidence shows that some financial aid programs increase college enrollment. Puzzlingly, there is little com-pelling evidence that Pell Grants and Stafford Loans, the primary fed-eral student aid programs, are effective in achieving this goal. In this chapter, we provide an in-depth review of this evidence, which taken as a whole suggests that complexity and uncertainty in the federal aid sys-tem undermine its efficacy. We document complexity in the aid system, comparing it in particular to complexity in the tax system. We build on our previous work by showing that complexity in the aid process does little to improve the targeting of both student loans and grants, for both dependent and independent students. We conclude that the current tar-geting of aid can be reproduced with a much simpler aid process. While we show that the targeting benefits of complexity are small, we further document that the costs are large. We offer new estimates of the compli-ance costs faced by applicants and the administrative costs borne by th