Question
In each year the federal student aid program provides financial means to prospective college students (4-year colleges) who cannot pursue higher education otherwise. Department of
In each year the federal student aid program provides financial means to prospective college students (4-year colleges) who cannot pursue higher education otherwise. Department of education is conducting a cost-benefit analysis to evaluate whether the program is efficient of not. Of course, the program has its basis on many other considerations than efficiency (positive net benefit) such as equity and fair education opportunity. You are a public policy analyst assigned to the task of estimating cost and benefits of the federal student aid program. The information you collected and/or developed are as follows:.
The program cost per year is $200 million.
The number of beneficiaries of the program per is $20,000 ($10,000 per student).
On average , a college graduate earns $70,000 per year and $40,000 for a high school graduate.
On average, both college graduates and high-school graduates are in the same tax bracket and pay the federal income tax (20% of their annual income).
Discount rate is 7%.
Conduct the cost-benefit analysis for the period of 2023 - 2043. Year 2023 is assumed to be the base year.
Is the program efficient (positive net benefit) or not?
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