College Aid Targets Middle Class Experts Say Clinton’s Tax Breaks Would Do Little For Poor Families
In the first 100 days of his second term, President Clinton wants Congress to pass a package of tax breaks that would “make two years of college as universal as high school.”
However, experts say the proposals would provide relatively little education assistance for poor families and would probably cancel out some existing government and private financial-aid programs.
Instead, they would mainly subsidize those who already can manage the expense of higher education, saving many middle-income families hundreds or even thousands of dollars a year.
“These proposals are completely aimed at middle-income families, so will we see large numbers of low-income students take advantage of these programs? The answer is no,” said David Merkowitz, a spokesman for the American Council on Education, a group that represents colleges and universities.
While nearly all families would welcome a break on college tuition and fees - which average $3,000 a year for public institutions and about four times that much for private ones - educators say federal assistance should be targeted first to the poor.
“If we were living in an era of expanding federal budgets, then you can do what is best for everyone. But with the fiscal situation as tight as it is, we should try to ensure college access to the most economically disadvantaged students,” said Irene Spero, executive director of federal and state relations at the College Board, an association of colleges and universities.
Sylvia Allen, 43, a single mother and a multimedia designer in San Francisco, said the tax breaks are appealing, but they won’t ultimately determine whether she sends her two children to college.
“I know college is absurdly expensive, so this would certainly help. But I don’t think (these breaks) will make a big dent in the overall cost,” Allen said. “So it’s not significant enough to change the whole picture.”
Under Clinton’s proposal, which would cost $42.9 billion over six years, families could choose between two tax breaks.
The first one, the Hope Scholarship, would allow a family to reduce its taxes by the amount of college tuition and fees paid, up to $1,500 a year per student. This tax credit would be available for two years and go to any student who maintains a 2.75 grade-point average (on a four-point scale) and stays off drugs.
The tax credit could be used to cover the expenses of a community college, which costs an average of $1,500 a year, or pay part of the cost of four-year colleges. The credit would also be refundable, which means that if a family pays less than $1,500 in income taxes, it would receive a check for the remaining amount.
Families earning less than $80,000 a year could take the full credit, which would phase out for families earning up to $100,000.
The other proposal would allow a family to subtract up to $10,000 in education expenses from taxable income each year. A deduction would be available for every year that there are tuition expenses for college, graduate school, community college or other certified training and technical programs.
Families earning less than $100,000 could take the full deduction, which would be phased out between $100,000 and $120,000.
Education experts say few students from poor families will benefit from the $1,500 tax credit.
Most low-income students receive Pell Grants, the federal government’s main college grant program, and the amount of those awards would be deducted from the tax credit. About 3.7 million students now receive Pell Grants, which average a little more than $1,500 each and can be as high as $2,700 for the poorest students.
“The Pell Grant and the tax credit will cancel each other out, so it will be a zero net gain for most low-income families,” said Merkowitz of the American Council on Education.
As for the proposed tax deduction, low-income students must first subtract the amount of their Pell Grants before they deduct their tuition. And for most low-income families the resulting tax benefits would be minimal.
Moreover, education analysts say any help the tax breaks do offer could be undermined for almost any student if colleges consider them when calculating a students’ overall aid packages.
“Of course the tax breaks will be factored in - there’s no free lunch, it all goes into the formula - and that means that it will reduce the amount of people’s financial need and it will reduce their financial aid,” said Merkowitz.
Still, Rick Miller, a spokesman at the U.S. Department of Education, said the Clinton proposals would benefit more than 6 million students who currently don’t receive federal grants.
“Many middle-class families are getting squeezed and either don’t have the money to send their children to college, or end up spending everything they have to send them,” noted Miller.
While each family will be affected differently based on its individual situation, many should be able to achieve some savings, said Matthew Hamill, vice president for administration at the National Association of Independent Colleges and Universities.
For relatively affluent families that receive little or no financial aid, most or all of the tax cuts would be a net gain. A family in the 28 percent bracket that spent $5,000, for example, would get a tax cut of $1,400 and not have to worry about losing financial aid.
For example, Bob Davenport, 43, who runs a mail-order and travel agency in Bradenton, Fla., said he would probably receive hundreds of dollars in savings when his son and daughter go to college.
“Any help is good, but it doesn’t make that much difference because I’m going to send my kids to college no matter what,” Davenport said. He added, “I’d rather see a cut in taxes in general so I could save the money myself.”
Ari Fleischer, spokesman for the House Ways and Means Committee, which will consider Clinton’s proposal, said the committee supports efforts to expand educational opportunities, but it’s too early to predict that Clinton’s proposals will become law.
“We’ll have to see the specifics of the proposals and hold hearings and address some of the concerns about the legislation,” Fleischer said.
Another concern is that colleges eventually may take advantage of these tax breaks as a way to rationalize raising tuition even further.
“The more deeply the federal government or other third parties get involved in college tuition, the more likely costs are going to run up. It’s easy money, so institutions won’t have much reluctance about raising tuition. It will become a vicious circle,” said Denis Doyle, a senior fellow in education at the Heritage Foundation, a conservative Washington-based think tank.
Educators also contend that cost is just one factor that makes students in the bottom-fifth of income levels the least likely to attend college. These students are also hampered by bad schools and lack of guidance from their families and school counselors about student aid.
“(Clinton’s) tax program will not help these students, it does not change their situation at all,” said Merkowitz.
Doyle of the Heritage Foundation said if Clinton’s goal is to send more people to college, he needs to improve the quality of education in the elementary, junior and high school levels so students will be prepared for college.
“It’s in middle school and high school where the die is cast. If you wait until college, it’s too late.”
xxxx CLINTON’S COLLEGE TAX BREAKS Under Clinton’s proposal families could choose between two tax breaks: The Hope Scholarship, would allow a family to reduce its taxes by the amount of college tuition and fees paid, up to $1,500 a year per student. This tax credit would be available for two years and go to any student who maintains a 2.75 grade-point average (on a four-point scale) and stays off drugs. The other proposal would allow a family to subtract up to $10,000 in education expenses from taxable income each year. A deduction would be available for every year that there are tuition expenses for college, graduate school, community college or other certified training and technical programs. Families earning less than $100,000 could take the full deduction, which would be phased out between $100,000 and $120,000.