The federal government spends over
$30 billion annually in tax benefits for college. The American Opportunity Tax Credit and the Lifetime
Learning Credit also provide benefits for deductions on interest on student
loans. The government spends a lot more money on college education than
elementary and secondary schools. The tax benefits are in place to get more
people into and through college. Two economists at Stanford University have
found that tax benefits and tax credits have no effect on college attendance.
They believe this could be because they are going to middle and upper class families
whose decision to send their kid to college is unlikely to depend on around
$2,500. Also the benefits are often not given back until after tuition is due
which would not effect enrollment. The complexity of tax benefits doesn’t seem
to be helping raise college attendance rates. It will be interesting to see if
they change how and when they give the credits in the future, and if it will
increase college attendance.
http://www.nytimes.com/2016/04/20/upshot/how-to-use-tax-credits-to-increase-college-attendance.html?ref=economy&_r=0
While $20 billion is huge figure in aggregate, a tax credit will not make someone decide to spend 40,000 annually on college .
ReplyDeleteThis is an interesting article. As the policy is designed, the tex for college tuition gonna increase the family income and lower education loan interest rate can encourage more students to attend college. But as the article points out, this policy does not work very well because the lateness of the tex return and the importance of the tex for many families. However, whatever the policy is taken, as what we talked about in class, trying to increase the attendance of college focus on increasing the labor quality which is also the "A". This is a way to keep increasing "Y". Also, this policy, as combination of increasing government spending and decreasing tex, wound increase national savings.
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