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Subsidizing Higher Education Through Tax and Spending Programs

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Publication Date: May 2007

Publisher(s): Tax Policy Center

Author(s): Elaine Maag; David Mundel; Lois Rice; Kim Rueben

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)

Keywords: Tax Policy; Taxes and Social Programs; Taxation of Households; Taxes and Social Policy

Type: Report

Abstract:

In 1997 Congress enacted a number of tax benefits directed toward helping middle- and upper-middle income groups meet rising college costs. This shift in goals and strategies raises concerns about the fairness and effectiveness of the evolving federal approach to higher education. This policy brief analyzes who benefits from the major direct spending program, Pell grants, and the three tax subsidies that most closely resemble grants, the Hope and Lifetime Learning credits and the deduction for tuition and fees. In addition, the brief assesses the potential impacts of these direct spending and tax programs on the affordability of college and the college-going rates of potential students.