In this article, Susan Dynarski talks about how tax credits that people receive do not encourage people to attend college. Tax benefits for people in college makes up most of the benefits the government gives to any level of education. This is because these benefits were suppose to help deduct interest on student loans and help students pay their tuition. What studies have found is there is no correlation between the two, in fact, these tax credits do not have any effect on people who attend or do not attend college. This is mainly due to the fact that families who receive these tax credits are either middle class or upper class families, and the amount they receive from these credits, which ranges around $2,000 to $3,000, have no affect if a family is going to send their child to college or not. Also the credits that are given out, usually come out after most schools' deadline to pay off their tuition, so these credits do not help with paying for school in that year. To me, if the government wants these tax credits to encourage people to go to college, the government needs to offer more of an incentive for families, or give them out earlier so they can help families pay their children's tuition.
http://www.nytimes.com/2016/04/20/upshot/how-to-use-tax-credits-to-increase-college-attendance.html?ref=economy&_r=0
$20 billion is an impressive number in aggregate, a $2,500 tax credit isn't going to make someone decide to spend $30K-$60K annually on a college education.
ReplyDeleteThe government should find some other ways to encourage people to attend college.
Also, the main receivers of tax benefit are those who already have some assets, most likely they are not facing the dilemma between college and enter the labor force in the first place. But for lower income individuals (families) are not going to save much with these policies, at least not enough to attend college.
This article is interesting, since it negates the true reason for tax credits should be to save household income for a purpose like education. But this article states that the largest tax benefit, tax credits, have no effect on increasing education. This is because credits decrease as income rises (0 credits after $1800). Also, $2500 of credits is unlikely to have a huge impact, considering college tuition is exorbitantly increasing every year, making it unaffordable. Also, tax credits are delivered too late to affect enrollment. In the FAFSA, the federal Pell Grant could be substituted with tax credits, making college cheaper at the time of payment, thereby increasing attendance. That could be an alternate approach.
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