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This paper compares partial and general equilibrium e ects of alternative education policies on the distribution of education and earnings. We build a life-cycle model with endogenous labor supply, consumption/saving and education choices, allowing for agents' heterogeneity in several dimensions and for incomplete insurance markets. The model internalizes the dynamic life-cycle e ffects of access to family resources by allowing altruistic parents to make voluntary inter-vivos transfers to their children. The numerical counterpart of the model, parametrized through a variety of data sources, is able to generate reasonable life-cycle patterns and, more importantly, education enrollment responses which are broadly in line with reduce-form estimates. Through numerical simulations, we compare the e ffects of alternative policy interventions on optimal education decisions, inequality, and output. In particular, we experiment with conditional grant and loan subsidies. While in partial equilibrium such policies can be e ective in increasing education and mildly reducing inequality, in general equilibrium the results are starkly different: the main e ect of a subsidy is to increase the supply of human capital, as one would expect. However, it is the more able but liquidity constrained individuals who take up extra education, while the education levels of the less able can actually decrease (they are crowded out). Thus the subsidy strongly acts on the composition of those in education. We fi nd that large equilibrium e ffects can be induced by relatively small changes in marginal returns when the population is heterogeneous in skills. Moreover we nd that increased subsidization of education results in partial crowding out of parental transfers, although this eff ect does vary with family characteristics.