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In an earlier Evidence Speaks post this year, Susan Dynarski and Judith Scott-Clayton summarized important research showing that federal tax benefits for college tuition have had no measurable impact on increasing college-going behavior. Moreover, they note that the benefits are numerous, overlapping and complicated. Yet for all their flaws, these tax breaks enjoy such strong support from lawmakers that even the oddest one, which quietly expires each year, is always revived in a last-minute bill just in time for the tax filing season. The tuition and fees deduction (“the deduction”) was recently extended for a seventh time in an omnibus budget bill in February. Out of all the tuition tax benefits the government offers, this one should be relatively easy to let go because of whom it unintentionally targets.
Here is how the deduction works. Tax filers can deduct up to $4,000 of tuition and fees paid for higher education in the tax year. It is an “above-the-line” deduction, meaning filers can claim it without having to itemize deductions. As a deduction, filers earn a benefit equal to their marginal tax rate. The maximum benefit any filer could extract from the deduction is $880, the top marginal tax rate of those who are eligible (22 percent) times $4,000. There is no limit to the number of times a filer can claim the deduction, so long as he has incurred tuition expenses, and it does not matter what type of credential he pursues. There is, however, an income limit. Taxpayers with adjusted gross incomes above $80,000 ($160,000 for joint filers) cannot claim it.
There is nothing odd about those terms per se, but they interact with other tax benefits the government offers for tuition such that only upper-income graduate students benefit from the deduction. First, undergraduates, while eligible for the deduction, don’t claim it because a different tax credit only for undergraduates is more beneficial: the American Opportunity Tax Credit, which is worth up to $2,500 in tax relief for filers earning up to $90,000 ($180,000 for joint filers). Tax filers can claim only one tuition tax benefit although they usually qualify for more than one. Second, graduate students with lower and middle incomes are also eligible for the deduction, but they can claim the $2,000 Lifetime Learning Credit, which almost always delivers a bigger tax break than the tuition and fees deduction. But the Lifetime Learning credit has a lower income cut-off than the deduction. Those earning over $66,000 ($132,000 for joint filers) in 2017 cannot claim it.
That’s how the deduction ends up targeting upper-income graduate students. While graduate students would always obtain a larger benefit from the Lifetime Learning Credit, they cannot claim it if they earn more than $66,000 ($132,000 for joint filers). They can, however, claim the deduction until their earnings exceed $80,000 ($160,000 for joint filers). Thus a narrow band of graduate students, those earning between the income limits for the two benefits, are the only students who would claim the deduction. At those levels, their incomes are higher than the incomes of about 80 percent of U.S. households. Of course, tax filers can unintentionally claim a less generous benefit if they are eligible for more than one, such as an undergraduate claiming the deduction when she was eligible for the American Opportunity Tax Credit, which does happen.
What the data say about eligible students
Using a representative sample of graduate students in 2011-12, Kim Dancy of New America and I estimated that just 8 percent of graduate students would benefit from the deduction. Meanwhile, 64 percent of graduate students would benefit most from the Lifetime Learning Credit. The rest of graduate students (28 percent) were ineligible for any tax benefit because they have no taxable income, their tuition was fully covered by grants and scholarships, or their earnings were too high. The analysis assumes that tax filers claim the benefit that provides them with the largest tax reduction if they qualify for more than one. These numbers have likely shifted in recent years, with even fewer students benefiting from the deduction, because Congress has increased the earnings cap for the Lifetime Learning Credit to account for inflation but left the limits for the deduction unchanged.
We also estimated the average benefit graduate students would claim through the deduction for the 2011-12 academic year. At $621, it was smaller than the $859 average benefit that filers eligible for the Lifetime Learning Credit could claim. Due to small sample sizes, however, we were unable to reliably assess important characteristics of filers eligible for the deduction, such as field of study.
The deduction didn’t start out as a graduate school tax break
As is often the case in public policy, lawmakers did not set out explicitly to provide a tax break to upper-income graduate students. In fact, graduate students were never the target group for the tuition tax breaks; undergraduates were always the focus. Although graduate students have been eligible for the tax benefits since their inception, changes to the policies over the years have left the deduction benefiting upper-income graduate students alone.
Prior to mid-1990s, the federal government did not offer widely-available tax breaks for college tuition. The idea first gained prominence when President Clinton proposed a $10,000 deduction for college tuition as part of his “Middle-Class Bill of Rights” reelection platform. After critics noted that a deduction would provide more help to families in higher tax brackets, Clinton added a separate tax credit for the first two years of college to his proposal to provide more even benefits. Congress adopted the president’s idea for the credit in 1997, naming it the Hope Tax Credit, but rejected the additional proposal for a $10,000 deduction. They instead replaced that proposal with a separate credit for “lifelong learning” (i.e., the Lifetime Learning Credit) that families could claim for education after the first two years of college, including graduate school.
Thus, President Clinton’s original idea for a deduction and a credit was replaced with two credits, the Hope Tax Credit and the Lifetime Learning Tax Credit. In keeping with their original purpose to provide middle-class tax relief, Congress capped income eligibility for both benefits at $55,000 ($100,000 for joint filers) in 1997.
With these two tax credits on the books, the idea of a deduction for tuition would be unnecessary and redundant, yet Congress later decided to add one anyway. Seemingly out of nowhere, lawmakers included a $4,000 deduction for tuition and fees in the Economic Growth and Tax Relief Reconciliation Act of 2001, the sweeping bill that included President Bush’s campaign proposal to cut marginal tax rates.
The deduction differed from the two initial tax credits in a key way, which partially explains why lawmakers added it. Families earning up to $80,000 ($160,000 for joint filers) would be eligible as of 2004. That was significantly higher than the income cutoff for the Hope and Lifetime Learning Credits at the time and would therefore offer tax benefits to families with incomes arguably well above middle class. But why not just raise the income limits on the existing credits then? Because creating the new deduction was a way to restrict costs relative to expanding the existing Lifetime Learning Credit in terms of forgone revenue to the government. Recall that the value of the deduction is worth the amount deducted times the marginal tax rate, which at the time it was created would have been $1,120 at the most. That is about half the maximum value of the Lifetime Learning credit.
In other words, the deduction was a way to let upper-income families into the college tax benefit club on the cheap. It also ensured their benefits would be smaller than those of the middle-class families, who were eligible for the credits.
At the time it was created, the deduction was as much an undergraduate benefit as a graduate one. Upper-income families would claim it for tuition paid in pursuit of either degree. According to my analysis referenced earlier, about the same share of graduate students as undergraduates qualified for it prior to 2009. But in 2009, Congress would make it pointless for almost any undergraduate to claim the deduction. That year, lawmakers replaced the Hope Credit with the American Opportunity Tax Credit, which provided larger benefits than the deduction with an income cutoff even higher than the deduction. With upper-income undergraduates now qualifying for American Opportunity Tax Credit, graduate students became the only group left who could benefit from the original tuition and fees deduction.
While Congress never decided to directly create a special tax break for upper-income graduate students alone, opting to extend the deduction year after year is effectively the same thing. The latest one-year extension, which made the deduction available for the 2017 tax year, cost the government over $200 million in forgone revenue.
At a time when an undergraduate education feels financially out of reach for so many families, it’s fair to ask why Congress continues to spend these resources on students who have already earned an undergraduate degree. Moreover, these students earn a median household income of $102,000, according to my analysis. There does not appear to be a good answer to that question other than inertia. Lawmakers have always extended the benefit so they continue to extend it. They may not realize, however, that it no longer benefits undergraduate students.
All of the tax benefits may be a policy failure for not increasing enrollment or being overly complex, but at least those for undergraduates put more money in the pockets of low- and middle-income families working toward their first degree. Today, the deduction does neither. It helps those who already have an undergraduate degree and earn high incomes to boot. While its cost in terms of forgone revenue are relatively modest, those resources would be better spent on aid that encourages students to enroll in and complete an undergraduate degree.
 Sue Dynarski and Judith Scott-Clayton, “The Tax Benefits for Education Don’t Increase Education,” Brookings Institution, April 2018, https://www.brookings.edu/research/the-tax-benefits-for-education-dont-increase-education/.
 Bipartisan Budget Act of 2018, Public Law 115–123, § 40203 (2018).
 Internal Revenue Service, “Instructions for Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) (2017),” https://www.irs.gov/pub/irs-pdf/i8863.pdf.
 There are some circumstances when the deduction might produce a larger benefit than the Lifetime Learning Credit if a filer paid tuition and fees below $4,000 and he is in the highest tax bracket of those eligible for the deduction. For example, a filer in the 22% tax bracket who deducts $3,000 in expenses receives a $660 tax reduction; under the Lifetime Learning credit his benefit would be $600.
 Author’s calculation using the American Community Survey, 2016.
 Government Accountability Office, “Improved Tax Information Could Help Families Pay for College,” May 2012, https://www.gao.gov/assets/600/590970.pdf
 Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015, 6–7, https://na-production.s3.amazonaws.com/documents/graduate-students-and-tuition-tax-benefits.pdf.
 Author’s calculation using the National Postsecondary Student Aid Study 2011–12. See also Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015.
 William J. Clinton, “Address to the Nation on the Middle Class Bill of Rights,” December 15, 1997, www.presidency.ucsb.edu/ws/?pid=49591.
 Douglas Lederman, “The Politicking and Policy Making Behind a $40-Billion Windfall: How Clinton, Congress, and Colleges Battled to Shape Hope Scholarships,” Chronicle of Higher Education, November 28, 1997.
 Taxpayer Relief Act of 1997, Public Law 105–34 § 201 (1997).
 Taxpayer Relief Act of 1997, Public Law 105–34 § 101 (1997).
 Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107–16 § 431 (2001).
 The top marginal tax rate for filers eligible for the deduction was 28 percent in the mid 2000s.
 See endnote 4. for an explanation of how sometimes when tuition and fees are below $4,000, tax filers can qualify for a larger tax reduction through the deduction than if the Lifetime Learning Credit.
 Jason Delisle and Kim Dancy, “A New Look at Tuition Tax Benefits,” New America, November 2015, https://static.newamerica.org/attachments/10416-a-new-look-at-tuition-tax-benefits/TaxCredits11.2.277d3f7daa014d5a8632090f97641cee.pdf; and Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015, 6–7, https://na-production.s3.amazonaws.com/documents/graduate-students-and-tuition-tax-benefits.pdf.
 Joint Committee on Taxation, “Federal Tax Provisions Expired in 2017” (JCX-5-18), March 9, 2018.
 Author’s calculation using the National Postsecondary Student Aid Study 2011–12. See also Jason Delisle and Kim Dancy, “Graduate Students and Tuition Tax Benefits,” New America, December 2015.
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On June 14, the school board of Fairfax County Public Schools (FCPS), the tenth largest school division in the United States, will convene and likely approve a number of changes to its sex-ed program, including replacing the term “biological sex” with “sex assigned at birth,” teaching that children aren’t born male or female, minimizing the role of abstinence, and excising clergy from a list of “trusted adults.” Although I am a product of FCPS, as was my mother and a long list of aunts, uncles, and cousins on both sides of my family, my children will not be attending their local elementary school. The radical sexual pedagogy promoted by FCPS, coupled with its well-publicized laxity in confronting illegal sexual behavior by its staff, has convinced me that my eldest daughter, who will enter kindergarten this fall, would be safer in a private school.
The latest recommendation by the county’s Family Life Education Curriculum Advisory Committee builds upon other sex-ed trends in FCPS, where “oral sex” is introduced to kids as young as 12. Thirteen-year-olds, meanwhile, are told about “anal sex” 18 separate times in one year’s worth of lessons. I understand why: the proliferation of pornography accessible to our youth has made sexting and increasingly aggressive sexual activity ubiquitous problems for FCPS and school districts across the country. Studies have shown that a majority of pornography depicts violence against women. As the adage goes, “monkey see, monkey do.”
Still, the committee’s recommendation to remove clergy from the list of “trusted adults” is ridiculous, given that FCPS has been dogged by illegal sexual activity by its employees for years. In March, a Sandburg Middle School teacher was charged with possession of child pornography. Last year, a former girls’ basketball coach at Lake Braddock Secondary School was accused of sexually harassing players—the school administration kept him on staff for months after the allegation was raised. A 2016 investigation by the local News4 I-Team discovered that the response of FCPS to multiple teachers accused of sexual misconduct—with students, no less—had allowed those educators to keep their teaching licenses for years after the offenses. A Bailey’s Elementary School teacher was arrested in 2015 and charged with sexually assaulting a teenage boy between 2004 and 2010.
FCPS has repeatedly demonstrated its lack of responsibility with our children, maintaining a policy towards sex offenders more relaxed than my local Catholic diocesan schools, while introducing children to sexual practices fraught with health dangers. Why should I trust a school system that perpetuates the demonstrably false narrative that public school educators are more trustworthy than priests, pastors, or rabbis? It’s bad enough that one day my children may attend colleges that permit, if not encourage, the kinds of risky sexual behavior depicted in Jon Krakauer’s 2015 best-selling book Missoula. Without a proper education, they’ll lack the maturity to navigate these treacherous waters as 12- and 13-year-olds, let alone as college freshman. As Cicero warned, “the enemy is within the gates; it is with our own luxury, our own folly, our own criminality that we have to contend.”
I suppose I’m not terribly surprised by the increased abasement of the school district that educated me. When I was in tenth grade, a ninth grader at my school attended a party where she got drunk and was persuaded into a compromising position by upperclassmen. Those boys (who to my knowledge were never punished) took pictures and sent them to a popular local radio host, “Elliot in the Morning,” who spoke about them on-air. The girl was, of course, humiliated and ended up transferring schools. I think she even changed her name. (As an aside, how has that DC101 disc jockey avoided legal scrutiny? He spoke publicly about viewing what amounts to child pornography!) We’ve certainly come a long way since 1999. With handheld, Internet-accessible phones now ubiquitous among our children, how could things not descend into even more alarming harassment, abuse, and misogyny?
FCPS still boasts an impressive educational pedigree. As their website notes, the class of 2018 has 223 National Merit Semifinalists, and Fairfax County high schools are recognized annually by the Washington Post as some of the most challenging in the United States. Yet as C.S. Lewis warned, “education without values, as useful as it is, seems rather to make man a more clever devil.” Teaching kids just entering puberty about how to “properly” use contraception and engage in safe anal sex can only be classified as a first-rate education in delinquency. Most American public schools have lost sight of Aristotle’s important maxim: “The happy life is regarded as a life in conformity with virtue…not spent in [sexual] amusement.”
Excluding my children from a public education is a hard decision for me, as I would think it is for many families—these are the institutions that have inculcated American ideas and ideals for generations of our citizens. I spent every year of grade school except kindergarten in the same public school district, which had an indelible impact on my socialization into our culture as well as on how I think and view the world. Public school districts also continue to employ huge numbers of our citizens: FCPS is the third largest employer in the state of Virginia. My mother spent more than 30 years in the system as an occupational therapist, from which she herself graduated in 1972. I was so inspired by my public education experience that I worked as a substitute and then a full-time high school history teacher, as well as a high school tennis coach.
Though I am a product of public schools and still take pride in my education, I won’t send my kids there—not as long as I can afford to send them elsewhere. Given the Catholic Church’s robust security policies in the wake of the early 2000s sex scandal, my kids are safer in my parish’s elementary school. My decision will stand until our public school systems—enduring what has become a nationwide sexual crisis—adopt policies that resist, rather than capitulate to, the worrying trends wreaking havoc on our families and our children.
Casey Chalk is a student at the Notre Dame Graduate School of Theology at Christendom College.
Today, all Americans are told, “Go to college!”
President Obama said, “College graduation has never been more valuable.”
But economist Bryan Caplan says that most people shouldn’t go.
“How many thousands of hours did you spend in classes studying subjects that you never thought about again?” he asks.
Lots, in my case. At Princeton, I learned to live with strangers, play cards, and chase women, but I slept through boring lectures, which were most of them. At least tuition was only $2,000. Now it’s almost $50,000.
“People usually just want to talk about the tuition, which is a big deal, but there’s also all the years that people spend in school when they could have been doing something else,” points out Caplan in my new YouTube video.
“If you just take a look at the faces of students, it’s obvious that they’re bored,” he says. “People are there primarily in order to get a good job.”
That sounds like a good reason to go to college. But Caplan, in his new book, The Case Against Education, argues that there’s little connection between what we absorb in college and our ability to do a job.
“It’s totally true that when people get fancier degrees their income generally goes up,” concedes Caplan, but “the reason why this is happening is not that college pours tons of job skills into you. The reason is…a diploma is a signaling device.”
It tells employers that you were smart enough to get through college.
But when most everyone goes to college, says Caplan, “You just raise the bar. Imagine you’re at a concert, and you want to see better. Stand up and of course you’ll see better. But if everyone stands up, you just block each other’s views.”
That’s why today, he says, high-end waiters are expected to have college degrees.
“You aren’t saying: you, individual, don’t go to college,” I interjected.”You’re saying we as a country are suckers to subsidize it.”
“Exactly,” replied Caplan. “Just because it is lucrative for an individual doesn’t mean it’s a good idea for a country.”
Caplan says if students really want to learn, they can do it without incurring tuition debt.
“If you want to go to Princeton, you don’t have to apply,” he points out. “Just move to the town and start attending classes.”
That’s generally true. At most schools you can crash college lectures for free. But almost no one does that.
“In people’s bones, they realize that what really counts is that diploma,” concludes Caplan.
Because that diploma is now usually subsidized by taxpayers, college costs more. Tuition has risen at triple the rate of inflation.
It’s not clear students learn more for their extra tuition, but colleges’ facilities sure have gotten fancier. They compete by offering things like luxurious swimming pools and gourmet dining. That probably won’t help you get a job.
“If you’re doing computer science or electrical engineering, then you probably are actually learning a bunch of useful skills,” Caplan says. But students now often major in abstract topics like social justice, diversity studies, multicultural studies.
“But don’t the liberal arts expand people’s minds?” I asked. Philosophy? Literature? Isn’t it all making our brains work better?
“That’s the kind of thing you expect teachers to say,” answered Caplan. “There’s a whole field of people who have actually studied this (and) they generally come away after looking at a lot of evidence saying, ‘Wow, actually it’s wishful thinking.'”
A study found that a third of people haven’t detectably learned anything after four years in college.
Although Caplan thinks college is mostly a scam, he says there’s one type of person who definitely benefits—professors like him.
“I’m a tenured professor,” he said. “A tenured professor cannot be fired…. You got a nice income and there are almost no demands upon your time.”
Professor Caplan is only expected to teach for five hours a week.
I told him that sounded like a government-subsidized rip-off.
“Yeah. Well, I’m a whistleblower,” replied Caplan.
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Talk of higher education reform tends to focus, understandably enough, on the cost of college. After all, steady tuition increases, rising student debt, and eye-popping sticker prices at well-known colleges and universities leave too many students and parents wondering if college is out of reach.
For all this healthy attention as to whether students can afford to go to college, however, we’ve too often lost sight of an equally crucial question — whether they’ll actually earn a degree once they’re there. The disheartening reality is that far too many students invest scarce time and money in attending a college from which they never graduate, and frequently wind up worse off than if they’d simply foregone college altogether.
In 2016, more than 40 percent of all students who started at a four-year college six years earlier had not yet earned a degree. Odds are that most of those students never will. In real terms, this means that nearly two million students who begin college each year will drop out before earning a diploma.
Indeed, according to our research, there are more than 600 four-year colleges where less than a third of students will graduate within six years of arriving on campus. When we look at public two-year colleges, most of which are community colleges, the graduation rate for full-time, first-time students is even lower. Only about 26 percent of students at those schools will have completed their degree within three years.
These dismal completion rates create significant private and societal costs. For individual students, the costs come in the form of student debt, lost time, and lower expected earnings (median annual earnings for students who complete a bachelor’s degree are $15,000 higher than for those who attended college but didn’t earn a degree). For society, the costs show up in forgone tax revenue and wasted public subsidies. In aggregate, some estimate that the total private and public costs of non-completion impose a half a trillion dollar drag on the economy.
In seeking to respond to these challenges, education scholars at the American Enterprise Institute and Third Way have joined together to commission a series of studies by five experts laying out the challenges of non-completion and the urgency for families, educators, and policymakers to take action to address it. (You can find those papers here.)
Now, we do well to heed the risks that a narrow focus on college completion can invite — especially when such an emphasis starts to shapes the incentives and strictures of public policy.
As we have seen in K–12, it is all too possible for simple metrics to yield gamesmanship, corner cutting, or manipulation. We are all-too-familiar with colleges that are content to churn out watered-down degrees with little labor market value, or that take care to only admit the most academically prepared students — leaving someone else to serve others for whom the path to completion will be more difficult. Obviously, measures that encourage colleges to “game the system” are a step in the wrong direction.
Thus, reforms intended to incentivize or improve completion rates need to be designed with scrupulous attention to potential consequences and due regard for the full range of outcomes that matter to taxpayers and students.
That said, there are examples of intriguing programs at the state and college-level that merit careful attention. Thirty-two states currently use performance-based funding policies that award a larger share of public subsidies to colleges that deliver impressive performance metrics. While the overall success of these policies is still up for debate, what’s clear is that states like Indiana, Ohio, and Tennessee are using these policies to gently prod colleges to focus on their students’ outcomes. In such states, some higher education institutions have modified their advising, counseling, and academic services to prioritize retention and completion.
Approached with care and appropriate attention to possible perverse incentives, performance-based funding is one way to encourage colleges to put more emphasis on supporting the students they enroll.
At the campus level, it’s vital to note that low-cost, quick-fix programs are predictably hard to come by. While there are no silver bullets, we know that higher education providers are already making hundreds of decisions that impact students’ experience and motivation in a way that makes it more or less likely they will succeed.
For example, Georgia State University issues automatic completion grants to college-level juniors and seniors with unmet financial need. On average, these grants are about $900 each, and they help students overcome the stumbling blocks that can be posed by expenses like heating bills and textbook costs. In 2016, nearly 2,000 students received completion grants, with GSU reporting that 61 percent of seniors who received one graduated within two semesters. Programs like these illustrate what colleges can do to help students graduate, without compromising standards or lowering the bar for college completion.
Even in these polarized times, we can agree that college students should complete their degrees and that taxpayers should get repaid for the funds they make available through student loans. We have the opportunity to seek solutions that focus not only on whether students can afford to arrive on campus, but on whether those students willing to do the work will leave with the education and the credential they came for. Left or right, that’s a cause we can all embrace.