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  • Higher education tax breaks – should they be abolished?
  • Posted By:
  • Jamie K
  • Posted On:
  • 20-Jun-2014
  • Ask any parent today and they will tell you how colleges are hideously expensive and completely unaffordable. At some of the most prestigious colleges, students have to pay an indecent amount of money. Even the lesser known institutions fleece students who do not have any choice as a result of which many families are mired in debt.

    Calling for enhanced college aid, our president underscores the enormity of the issue. He stresses time and again on the importance of providing high quality education for each and every deserving and hard working American students.

    Even though the cost of college is enormous, it is still a great deal as it is practically disastrous to not go to college. In the long run, if you look at the overall picture, college is cheaper even though expensive.

    However for most Americans, trying to handle their immediate issues is more important than considering long run value of college education. A massive ongoing effort by politicians has resulted in a variety of loan and grant programs. Leaders continue to strive to help and their efforts include a tax code too since the nineties.

    According to the center for American Progress, specific behaviours are rewarded or encouraged by the tax code provisions. These provisions are designed to encourage behaviours such as saving for retirement or owning a home. Higher education too attracts such tax benefits.

    For example, college tuition is mostly tax deductible, tax free contributions can be made to college savings accounts and student loan interest deductible on loans. In spite of so many concessions and tax benefits offered to students, why then are colleges still out of reach for many?

    This is because, to a certain extent, the tax breaks are not very effective which means they do not work as expected. For one, the tax breaks are unnecessarily complex and two they are poorly targeted as a group. For students who are really in need, this system does not provide adequate help even though they deliver benefits to students who can anyway afford college education.

    So, considering now the downsides of tax breaks, for the low income students, the system does not deliver effectively on time leaving behind the same challenges and for certain educational preferences, a steep price tag is created by tax based aid. Problems are posed by incidence, poor targeting and regressive nature of educational tax provisions which continue to remain less transparent.

    The complex federal tax system fails to help deserving students makes the most of the incentives and breaks. Higher education aspirants are offered at least 12 tax preferences, each one of them highly complex. To sift through them and make sense is an activity that borders on nightmare for students and their families.

    According to a report published by the Government Accountability Office, it is time to make tax provisions for higher education understandable, simple and transparent. Some experts opine that direct spending programs are simpler and can replace the confusing and complicated tax system. Overall, tax incentives seem to be a very ineffective way to deliver affordable education.


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