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Idea of the Day: How to Reform the Tax Code to Promote College Affordability

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The United States tax code is full of provisions designed to encourage or reward specific behaviors, such as owning a home or saving for retirement. Tax benefits for higher education are no exception: Contributions to some college savings accounts grow tax-free, college tuition is often tax deductible, and some student-loan borrowers are able to deduct the interest paid on their student loans just as they would the interest paid on their mortgage.

These higher education tax provisions have implications for access, affordability, and equity. Higher-income families benefit from tax-free savings toward future college costs through Section 529 college savings plans. The tax code, however, rewards middle-class families for savings less, because tax benefits are much smaller for those in lower tax brackets, and these families largely do not participate. While in school, parents and students face several competing tax incentives—such as the American Opportunity Tax Credit, Lifetime Learning Credit, and tuition and fees deduction—and an estimated 1.7 million tax filers each year do not make the optimal choices. In addition, the tax benefits available on student-loan interest help some struggling borrowers, but not others, because some earn too little to truly benefit.

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Print: Allison Preiss (economy, education, poverty)
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Print: Tom Caiazza (foreign policy, health care, energy and environment, LGBT issues, gun-violence prevention)
202.481.7141 or tcaiazza@americanprogress.org

Print: Chelsea Kiene (women's issues, Legal Progress, Half in Ten Education Fund)
202.478.5328 or ckiene@americanprogress.org

Spanish-language and ethnic media: Tanya Arditi (immigration, race and ethnicity)
202.741.6258 or tarditi@americanprogress.org

TV: Rachel Rosen
202.483.2675 or rrosen@americanprogress.org

Radio: Chelsea Kiene
202.478.5328 or ckiene@americanprogress.org

 

This is part of a regular column: Idea of the Day

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