Document Type

Article

Publication Date

6-2007

Abstract

This article analyzes the status in 2007 of higher education costs in relation to U.S. taxation policy and the declining real income and ability of lower and middle income taxpayers to pay tuition and fees. Then-current tax policy lessened support for families with the greatest financial need while providing much greater levels of support to those with greater financial resources. To enhance distributional fairness, the author proposes that Congress repeal tax provisions that have this effect and consolidate the separate sources of federal financial aid grants into one program--an expanded Pell Grant program. He also advises that Congress make the Hope Scholarship credit and the Lifetime Learning credit refundable and that the separate deduction for higher education expenses should be allowed to sunset at the end of 2007. In addition, Congress should enact limits on the benefits available from participating in §529 plans, which provide tax benefits for taxpayers who set aside savings to pay for future higher education costs.

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