Dec 05, 2013 | Permalink »
Students with Least Amount of Need Receive the Most Tax-Based Student Aid
This article is the first in a three-part series highlighting charts from the recent publication, Higher Education Tax Reform: A Shared Agenda for Increasing College Affordability, Access, and Success, written by the Consortium for Higher Education Tax Reform for the Bill & Melinda Gates initiative, Reimagining Aid Design and Delivery. The Consortium is a partnership of four organizations concerned with college affordability, access, and completion for low- and modest-income individuals: the Center for Postsecondary and Economic Success at CLASP, Young Invincibles, the New America Foundation's Education Policy Program, and The Education Trust.
By Julie Strawn
The federal government spends nearly $34 billion annually on student aid delivered through the tax system—a billion more than it spends on Pell Grants. Despite extensive research showing that low- and modest-income families are more likely to respond to changes in college costs and student aid, this tax aid provides substantial support to higher-income families who are well beyond middle class.
For the year 2013, the Tax Policy Center estimates that more than half of the benefits of the Tuition and Fees Deduction and the Exemption for Dependent Students will go to households with annual incomes of $100,000 or more. Nearly a quarter of American Opportunity Tax Credit benefits (24 percent) and Student Loan Interest Deduction benefits (23 percent) will go to families making more than $100,000 per year. To put that in perspective, almost 80 percent of American households had incomes below $100,000 in 2012. Additionally, there are no income participation limits on federally subsidized 529 college savings plans. What does all of this mean? Essentially, students from families with the least financial need are receiving the most tax-based aid because of poor targeting.
Dec 03, 2013 | Permalink »
The 34 Billion Dollar Question: Is Tax-Based Aid Advancing College Access and Completion Goals?
By Julie Strawn
If asked, what would you say is the largest form of federal student aid, excluding loans? If you guessed Pell Grants, you'd be wrong; it's student aid delivered through the tax system.
Since its inception in the late nineties, tax-based student aid has more than quadrupled and now represents more than half of all non-loan federal student aid. In 2012, the federal government spent nearly $34 billion on tax-based aid—$1 billion more than the total spent on Pell Grants. This growth has occurred with little scrutiny about whether tax-based aid advances national goals.
Given rising college costs and tight federal budgets, Congress should take action to make sure tax subsidies for higher education improve college affordability, access, and completion. The Consortium for Higher Education Tax Reform—a partnership of the Center for Postsecondary and Economic Success at CLASP, Young Invincibles, the New America Foundation's Education Policy Program, and The Education Trust—has developed specific recommendations that would go a long way toward fixing current problems with tax-based aid.
Our reforms would ensure that tax-based student aid goes to low- and modest-income students who struggle most with college costs, rather than higher-income individuals who are already very likely to attend college without a tax incentive. We would eliminate overlapping tax benefits, make it easier for families to understand and claim tax-based student aid, and deliver aid when college bills are due. Further, we propose linking tax breaks for higher education institutions to their performance on college access and completion. Finally, we would reinvest any potential savings from our reforms into student aid. Every dollar should be used to improve college access, affordability, and success, including through funding for the Pell Grant program.
Our package of reform proposals would realign the federal investment in tax-based aid with national goals of increasing college affordability, access, and success. More than 80 percent of households with college students would continue to receive higher education tax benefits under our proposals, and the aid would be more effectively distributed among the low- and modest-income households who most need help.
Critically, our proposals are also fiscally responsible. According to estimates from the Tax Policy Center, our reform package would raise $16 billion in revenue over ten years (2014-2023)—funds that would further help students through reinvestment in financial aid.
Nov 07, 2013 | Permalink »
Nearly One in Five Americans Has Low Basic Skills, but Solutions Exist to Strengthen America’s Workforce
One month after the release of the international report that found the U.S. lagging behind in measures of adult skills, the U.S. Department of Education has released new data that sheds light on the depth and severity of the problem.
Literacy, Numeracy, and Problem Solving in Technology-Rich Environments Among U.S. Adults: First Look examines basic skills by demographic and other socioeconomic factors, including race, educational attainment, foreign status, and age. This critical information will enable us to design smarter, more effective policy solutions that improve the skills of America's adults and youth.
A first look at these data show that almost one-fifth (18 percent) of U.S. adults have low literacy-and almost one-third (30 percent) have low numeracy, or basic math, skills. Other key findings from the report include the following:
- 20 percent of adults with a high school diploma have only beginning literacy skills. In addition, more than one-third (35 percent) of adults with this level of education have only beginning numeracy skills. Today, graduating from high school does not guarantee that one has the skills needed to compete for family-sustaining jobs, which often require higher-level skills and postsecondary credentials.
- 14 percent of young adults (ages 16-24) have low literacy skills and 30 percent have low numeracy skills. More young adults in the U.S. are low-skilled compared to the international average (11 percent). Without targeted education and skills training focused on the unique needs of this population, the long-term mobility of these workers will be compromised and the future economic vitality of the U.S. workforce will be endangered.
- People from minority and underrepresented groups have the lowest literacy levels in the U.S. Blacks adults are twice as likely to have low literacy and numeracy skills compared to all adults generally (35 percent have low literacy). This gap is even higher among Hispanic adults: 43 percent have low levels of literacy and 56 percent have low numeracy skills.
These new data-the first to examine adult basic skills in over a decade-point to the need for a stronger, more comprehensive approach to educating America's current and future workforce. Educating workers, both young and old, and helping them get on a path to postsecondary credentials provides them with individual economic mobility and strengthens the U.S. economy and state budgets.
Developing pathways to postsecondary credentials and economic success will require state and federal investments in education and training for low-income, low-skilled workers, as well as a fundamental rethinking of policies and service delivery models. Strategies to achieve these goals include: refocusing adult education and English language services on postsecondary and career success; developing career pathways to postsecondary credentials for low-skilled adults, disadvantaged and disconnected youth, and low-income adults; and addressing inequities in in college access and success for youth of color.
Learn more about CLASP's policy solutions to strengthen America's workforce in From PIAAC to Policy Solutions: Promoting Postsecondary and Economic Success for Low-Skilled Workers.
A discussion of these findings and a release of a U.S. Department of Education report featuring policy recommendations to improve the skills of the adult workforce will take place at an event on November 12, 2013. The report was authored by the Organisation for Economic Development and funded by the Office of Vocational and Adult Education at the U.S. Department of Education.