The TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation has released a new report that looks at the effects that tax credits for higher education have had on the rising costs of college tuition. The report explains how the credits have expanded, how they disproportionately benefit higher income families, and how they have failed to stop the increase in student loan debt. Additionally, it examines how, instead of being a helping hand for students, tax credits have turned into a windfall for universities.
College tuition plus room and board has grown by approximately 70 percent in the past decade. The rate of increase for tuition costs far outpaces the inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. rate and doesn’t appear to be slowing down anytime soon.
Because of the Free Application for Federal Student Aid (FAFSA), the college has intimate knowledge of each student’s (or family’s) income and assets and therefore knows to what extent a student’s family can afford college and if they are eligible for tax credits, loans, or other financial aid. This information allows the college to simply adjust its financial aid package in order to capture the maximum value of the tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. .
To read the full report, click here.
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