Why Clinton’s College Plan Will Work
Over the past three decades, virtually all economic and income gains in the United States have gone to college graduates.
The income gap between college graduates and high school graduates has more than doubled since 1980. And those who attend college but fail to graduate get few, if any, of the benefits of earning a diploma.
The connection between what you earn and what you learn is one of the reasons that Washington has increasingly used the tax code to provide additional financial assistance to college students. Among those incentives are the Hope and Lifetime Learning Credits. But while both are an important source of financial assistance, there are a number of problems associated with each.
First, none of the existing education tax credits are refundable. As a result, many low-income families can’t take advantage because they don’t pay enough in taxes. A family of four must have an income above $30,000 to get the maximum credit. In fact, according to a study by Bridget Terry Long of Harvard University, nearly half of the families who are eligible for the credits cannot claim the maximum amount because their income is too low.
Second, only students who pay over $10,000 a year in tuition and fees get the full Lifetime Learning tax credit. That is nearly double the cost at a typical public four-year college and four times that at a typical community college.
Third, as Washington has layered one new tax break upon another, the entire system of tax-based college subsidies has become confusing, and even contradictory. For example, under current law there is no uniform definition of qualifying education expenses, and there are different income limitations for the various incentives and provisions. According to one study by the Tax Policy Center, the complexity of Hope and Lifetime meant that only two-thirds of students eligible actually took either tax incentive.
Fourth, the credits are delivered to households well past the time when students have to pay their tuition bills. Students who manage to afford tuition can file for a tax credit months later. But those who can’t scrape together the payment never make it into the classroom and never file for the benefit in the first place. Such back-loading of the tax incentives keeps money out of the hands of students for whom price is truly a barrier.
That’s why I welcomed news that Senator Hillary Clinton has offered a bold, smart plan that would make college more affordable for any student who can make the grade. Her plan offers the right idea at the right time.
The centerpiece of the Senator’s plan is a single, refundable $3,500 college tax credit, based on an idea first proposed by the Progressive Policy Institute in 2003. The idea also served as a key part of the DLC’s 2006 American Dream Initiative, which was led by Senator Clinton.
Her college plan would also make college aid more generous, simplify the tax code, inspire more young people to serve their country, and hold colleges accountable for making sure more students graduate. That’s good news for America’s students, and the long term future of our nation.
October 13th, 2007 at 2:48 pm
Every time the government increases aid to students, the colleges raise their tuition. It’s a little game that they all play. What we need are vouchers for higher education too. Get rid of all the gimmicks; let people purchase education like any other good or service.
October 16th, 2007 at 9:18 pm
Mr. Weinstein, as Bush would say, misunderstands economics.
College grads make more than high school-only grads because the college grad’s skills are relatively scarce compared to high school-only grads when they perform a activity which rewards them for those skills.
To naively assume that by increasing the thing which is scarce (college grads) they will continue to be paid a premium for their scarcity demonstrates a lack of clear thinking.
Here is a simple test, would you pay more to have a college grad cut your lawn than a high school grad? Why?