Clinton blows it on undergraduate tuition tax cut

Rohit Khare (
Mon, 07 Jul 1997 22:10:18 -0400

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[Mind you, I don't think *any* tax policy is called for towards
undergraduate tuition. We want cheapers schools, fund state Us. We
want more kids in college? fund more need-based aid. Middle-class
aid? a cynical ploy for votes.

And don't get me started on the phyrric let's-tax-graduate-tuition
hobbyhorse -- it would only amount to at 15% across-the-board cut in
academic R&D, minus a lot of friction and broken careers]


July 7, 1997

Misdirected College Help

WASHINGTON -- The tax cut packages proposed by Congress and the
President all include relief for families struggling to pay the
rising costs of college. The problem is that none of the proposals do
much to help those who are struggling the most: students and families
who don't have enough income to benefit from tax breaks.The House and
Senate bills both include a variation on President Clinton's proposed
Hope Scholarship, a tax credit worth up to $1,500 a year for the
first two years of undergraduate education or training. An early
version of the Clinton proposal had made the tax credit "refundable,"
meaning that students and families owing little or no taxes would get
the money back in the form of a tax refund. But Mr. Clinton dropped
that provision to reduce the cost of the program and avoid
complications for the Internal Revenue Service.

As a result, at least 30 percent of American families with children
would not receive a penny of this credit because they do not have
enough taxable income. In fact, the proportion of students who won't
benefit from the tuition credit is probably higher. One reason is
that many college students today are older and independent of their
parents. They have taken longer to get a degree or have returned to
school to upgrade their skills and credentials. Most of these
nontraditional students are just trying to make ends meet and would
not have the tax liability to take advantage of the tuition credit.

Most of the benefits would go to those in the highest income
brackets, and their college enrollment rates are already very high.
Ninety percent of 18- to 24-year-olds from families in the top income
quartile enroll in some form of post-secondary education or training,
compared with half of those from the lowest income quartile. College
graduation rates show even wider gaps. A young person reared in an
affluent household is six times more likely to earn an undergraduate
degree by age 28 than one reared in a low-income household.

The final tax bill may also include incentives for families to save
for their children's education, and interest on student loans may
become a deductible expense. These measures would be constructive and
would cost the Treasury relatively little. But the tax credit for
current tuition expenses would constitute a major new entitlement,
costing from $20 billion to $35 billion over the next five years,
depending on how it is finally configured.

Such a significant national investment should go not just to middle-
and upper-middle-income citizens; it should reach Americans at the
low end of the economic scale -- those who most need help. A more
even distribution of benefits is not just for the sake of fairness.
Lifting the country's net investment in education won't happen if the
benefits go largely to students and families who are already likely
to enroll in college.

President Clinton has argued more persuasively than anyone that
education is the key not only to economic growth, but also to
narrowing the gap between rich and poor. In reality, the tuition tax
policies he may soon sign into law could deepen the divide between
the educational haves and have-nots.

The Clinton Administration has suggested that aid programs based on
need will take care of the lowest-income students, and it has
proposed a $300 increase in the maximum Pell Grant. But that change
does not balance the scales compared with a $1,500 tax credit. Unlike
provisions of the tax code, moreover, Pell Grants and other
discretionary programs have no guaranteed financing from year to

The focus of Federal higher education policy has long been to promote
and equalize access, especially for those with the fewest resources.
Let's not erode that commitment. The middle class is getting its
share. We should do at least as much for our neediest citizens.

Lawrence E. Gladieux is director of policy research at the College
Board, which sponsors the Scholastic Assessment Test.
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