| Author(s): | Huelsman, M. |
| Title: | Enhancing tax credits to encourage saving for higher education: Advancing the American opportunity tax credit and reforming the saver's credit |
| Source: | http://www.newamerica.net/sites/newamerica.net/... |
| Date: | 2010 |
| Organization: | New America Foundation |
| Short Description: | Better-targeted incentives – particularly via existing tax credits – could positively impact savings behaviors, as well as make higher education a more concrete possibility for low-to-moderate income families in ways that simply increasing financial aid packages may not. |
| Annotation: | For education savings the federal government allows tax-free growth and tax-free qualified withdrawals through 529 college savings plans, Coverdells, and other savings vehicles. Many states also offer tax-free distribution,
tax deductions, and other incentives for saving in 529 plans. These incentives were created to help families keep pace with the rising cost of college education.
However, incentives such as tax-free growth and nonrefundable tax credits carry little weight with low-to-moderate income (LMI) families who struggle the most with college affordability, since many have little or no tax liability. Furthermore, extensive research has demonstrated LMI students are less likely to enroll in college or complete degrees, despite decades of nominal increases in federal financial aid. Better-targeted incentives – particularly via existing tax credits – could positively impact savings behaviors, as well as make higher education a more concrete possibility for LMI families in ways that simply increasing financial aid packages may not. |
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