Optimal intergenerational transfers: Public education and pensions

•We derive optimal education-pension paths when education-loan market is incomplete.•Education subsidy and pension transfers initially coexist on the optimal path.•Pensions are eventually phased out in finite time due to efficiency considerations.•Education rises and eventually crosses the complete market laissez-faire level.•The long-run equilibirum dominates the best laissez-faire market outcome.