Higher-income students get more public money for their education

March 08, 2014 | The Sacramento Bee |  Link to article

 This article was also featured in the Huffington Post, San Jose Mercury News, Hechinger Report, Washington Monthly, Anchorage Daily News, Tulsa World and McClatchy DC.

WASHINGTON -- It's not just colleges and universities that are shifting their financial aid from lower-income to higher-income students.

Tuition tax credits and other tax breaks to offset the cost of higher education - nearly invisible federal government subsidies for families that send their kids to college - also disproportionally benefit more affluent Americans.

So do tax-deductible savings plans and the federal work-study program, which gives taxpayer dollars to students who take campus jobs to help pay for their expenses.

The tax credits alone cost the government a combined $34 billion a year, or $1 billion more than is spent on Pell Grants, the direct government grants for low-income students.

And even though only one-fifth of American households earn more than $100,000 per year, that group got more than half of the deductions for tuition, fees and exemptions for dependent students, according to the Tax Policy Center, an independent research group run jointly by the centrist, and sometimes center-left Brookings Institution and Urban Institute.

This has occurred despite research showing that 13 out of 14 students whose families received tax breaks on tuition would have gone to college anyway.

"We might be sympathetic to those upper-income folks who are struggling with what are - yes - extremely expensive private colleges," said Julie Strawn, a former senior fellow at the Center for Law and Social Policy, which advocates for greater access to college for the poor. "But do the tax credits really need to go to the wealthiest fifth of American households, which is what's happening now?"

A new coalition of advocacy organizations, supported by the Bill & Melinda Gates Foundation, is pushing for the tax credits to be streamlined and redirected to the poor. (The Gates Foundation is among the funders of The Hechinger Report and the Education Writers Association, which co-produced this story.)

And a bill in the U.S. House of Representatives sponsored by Democrat Danny Davis of Illinois and Republican Diane Black of Tennessee, co-chairs of the Tax Reform Working Group on Education, would gradually lower the income eligibility to $86,000 from the current $180,000.

"In general, federal financial aid was created to help low-income students go to college, and the purpose of the tax credits was to make college more affordable for middle-income students," said Stephen Burd, a senior policy analyst at the New America Foundation. "The problem is that the tax credits are going beyond the middle class."

But even supporters say the prospects of Congress lowering the income eligibility are dim, even at a time of belt-tightening in Washington.

"It's definitely an uphill fight," Burd said. "It's politics. Upper-income families tend to vote more than lower-income families."

The higher-education lobby also opposes lowering the income eligibility for tuition tax credits.

"We think it's important to have mechanisms in place to help those students go to college who otherwise wouldn't go to college, but it's also about being able to help all students pay for college, including middle-income students," said Steven Bloom, director of federal relations for the American Council on Education, the preeminent association of U.S. colleges and universities

Bloom said even families that earn more than $100,000 annually can be hard-pressed to pay for college without help, depending on how many children they have enrolled at one time, for instance, and at which institutions.

"We just don't buy the argument that there isn't enough room in the federal budget to help different families in different income brackets in different ways," said Sarah Flanagan, vice president for government relations and policy at the National Association of Independent Colleges and Universities.

And higher-income families, Flanagan said, "bring money to the table to keep the colleges going so they in turn can give more support to low-income students."

The university associations "have a point," said Deborah Santiago, co-founder and chief operating officer of Excelencia in Education, which advocates for Latino and other underrepresented students. It can be a stretch these days even for wealthy families to pay for college, she said.

But as far as government policy goes, "Are you going to get more value from helping a low-income person achieve social mobility," Santiago said, "or from helping a middle-class person stay where they are?"

(This story was produced by the Hechinger Report, a nonprofit education-news outlet affiliated with Teachers College, Columbia University, in collaboration with the Dallas Morning News.)

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