Intergenerational Effects of Paying for College

Abstract

A study of parents' and their children's means of paying for college was conducted to determine if the use of parent contributions, work earnings, or student financial aid shows influence across generations. This study used data from the National Postsecondary Student Aid Study of 1990 in a path model with controls for the child's academic ability, gender, declared major, institutional selectivity, tuition cost, and distance from home. Indirect effects are indicated that increase parental cash gifts and loans to the child, mediated by parents' measures of socioeconomic status, the timing of college savings, and the child's degree aspirations. The child's financial aid is also indirectly affected by measures of the parents' socioeconomic status (higher status resulting in less aid). The direct effect of the parent receiving student financial aid is in larger amounts of student aid for the child. No intergenerational effects occur between the parents' use of work earnings to finance college and the amount of work earnings in college for the child.