Report to Congressional Committees

United States General Accounting Office

GAO

September 2002 STUDENT AID AND

TAX BENEFITS

Better Research and

Guidance Will

Facilitate Comparison

of Effectiveness and

Student Use

GAO-02-751
Page i GAO-02-751 Student Aid and Tax Benefits

Letter 1

Results in Brief 3

Background 5

Hope and Lifetime Learning Credits Provide Benefits for a

Substantial Portion of Undergraduate Students 10

Available Policy and Instructions Provide Clear Guidance about the

Impact of Several, but Not All, Tax Provisions on Eligibility for

Title IV Aid 24

Little Information Is Available to Congress on the Relative

Effectiveness of Title IV Grants, Loans, and Hope and Lifetime

Learning Tax Credits 26

Conclusions 29

Recommendations to the Secretaries of Education and Treasury 30

Agency Comments 31

Appendix I Estimation of HOPE and Lifetime Learning Tax

Credits and Title IV Student Aid 33

Appendix II Research on the Effects of Grants, Loans, and Tax

Credits 41

Appendix III Comments from the Department of Education 42

Appendix IV Comments from the Department of Treasury 44

Appendix V GAO Contacts and Staff Acknowledgments 45

GAO Contacts 45

Staff Acknowledgments 45

Bibliography 46

Contents
Page ii GAO-02-751 Student Aid and Tax Benefits

Tables

Table 1: Selected Postsecondary Education Tax Provisions, 2002 8

Table 2: Estimated Use of Tax Credits and Title IV Aid Among All

Undergraduates in 1999-2000 36

Table 3: Percent of All Undergraduate Students Receiving HOPE

Credit 36

Table 4: Percent of All Undergraduate Students Receiving Lifetime

Learning Credit 36

Table 5: Average Amount of HOPE Credit 37

Table 6: Average Amount of Lifetime Learning Credit 37

Table 7: HOPE Credit as a Percent of Tuition and Fees Charged

and Net Tuition and Fees Paid by Dependent Students 37

Table 8: HOPE Credit as a Percent of Tuition and Fees Charged

and Net Tuition and Fees Paid by Independent Students 38

Table 9: Lifetime Learning Credit as a Percent of Tuition and Fees

Charged and Net Tuition and Fees Paid by Dependent

Students 38

Table 10: Lifetime Learning Credit as a Percent of Tuition and Fees

Charged and Net Tuition and Fees Paid by Independent

Students 38

Table 11: Amount of HOPE Credit and Title IV Grant or Loan

Assistance Received by Dependent Students Obtaining

Both 39

Table 12: Amount of HOPE Credit and Title IV Grant or Loan

Assistance Received by Independent Students Obtaining

Both 39

Table 13: Amount of Lifetime Learning Credit and Title IV Grant or

Loan Assistance Received by Dependent Students

Obtaining Both 40

Table 14: Amount of Lifetime Learning Credit and Title IV Grant or

Loan Assistance Received by Independent Students

Obtaining Both 40

Figures

Figure 1: Estimated Use of Higher Education Tax Credits and Title

IV Student Aid among All Undergraduates in 1999-2000 4

Figure 2: Percent of All Undergraduate Students Receiving HOPE

Credit 11

Figure 3: Percent of All Undergraduate Students Receiving Lifetime

Credit 12
Page iii GAO-02-751 Student Aid and Tax Benefits

Figure 4: Average Amount of HOPE Credit Received by Dependent

and Independent Students 13

Figure 5: Average Amount of Lifetime Learning Credit Received by

Dependent and Independent Students 14

Figure 6: HOPE Credit as a Percent of Tuition and Fees Charged

and Net Tuition and Fees Paid by Dependent Students 15

Figure 7: HOPE Credit as a Percent of Tuition and Fees Charged

and Net Tuition and Fees Paid by Independent Students 16

Figure 8: Lifetime Learning Credit as a Percent of Tuition and Fees

Charged and Net Tuition and Fees Paid by Dependent

Students 17

Figure 9: Lifetime Learning Credit as a Percentage of Tuition and

Fees Charged and Net Tuition and Fees Paid by

Independent Students 18

Figure 10: HOPE Credit and Title IV Grant and/or Loan Assistance,

Dependent Students Receiving Both 20

Figure 11: HOPE Credit and Title IV Grant and/or Loan Assistance,

Independent Students Receiving Both 21

Figure 12: Lifetime Learning Credit and Title IV Grant and/or Loan

Assistance, Dependent Students Receiving Both 22

Figure 13: Lifetime Learning Credit and Title IV Grant and/or Loan

Assistance, Independent Students Receiving Both 23

Abbreviations

AGI adjusted gross income

EFC expected family contribution

FAFSA Free Application for Federal Student Aid

GPRA Government Performance and Results Act of 1993

IRS Internal Revenue Service

HEA Higher Education Act

NPSAS National Postsecondary Student Aid Study

SEOG Supplemental Educational Opportunity grants

SOI Statistics of Income
Page 1 GAO-02-751 Student Aid and Tax Benefits

September 13, 2002

The Honorable Edward M. Kennedy

Chairman

The Honorable Judd Gregg

Ranking Minority Member

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable John A. Boehner

Chairman

The Honorable George Miller

Ranking Minority Member

Committee on Education and the Workforce

House of Representatives

The federal government uses a range of policy tools to assist students in

financing postsecondary education, including direct expenditures and

federal tax law. Title IV of the Higher Education Act (HEA), first adopted

in 1965, authorizes federal grant and loan programs, providing a total of

$53 billion in assistance to 8.1 million students in fiscal year 1999. In the

past decade, the federal government has increasingly relied upon another

tool: the tax code. The Taxpayer Relief Act of 1997 allowed eligible

taxpayers to reduce their tax liability by receiving up to a $1,500 HOPE or

$1,000 Lifetime Learning tax credit for tuition and course-related fees paid.

The 2001 Economic Growth and Tax Relief Reconciliation Act created a

new tax deduction for tuition expenses, and expanded many existing

higher education tax provisions. For example, the law excluded the

earnings of state-sponsored college savings and prepaid tuition plans from

federal income taxation, providing they are used to meet tuition and other

educational expenses, and it increased the annual contribution limit for

Coverdell Education Savings Accounts. The federal investment in

providing student assistance through the tax code has risen sharply, from

an estimated $0.0056 billion in 1996 to $7.6 billion in 2002,1

 more than

80 percent of which is comprised of HOPE and Lifetime Learning tax

 1

Cost is measured in estimated revenues foregone, and expressed in constant 2002 dollars.

Total costs are calculated on the basis of eight tax provisions that aim to help students and

families save, pay for, or repay the costs of higher education, and do this by permitting tax

filers to reduce their income tax liability through the use of qualified educational expenses.

See table 1.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-751 Student Aid and Tax Benefits

expenditures. In tax year 1999, 6.4 million tax filers obtained about

$4.8 billion dollars in higher education tax credits. In comparison, the

federal government’s largest student aid program, the Pell grant program,

provided 3.7 million students with $7.2 billion dollars in grants during the

1999-2000 academic year.

To assist Congress as it prepares for the reauthorization of HEA, we

reviewed the title IV aid programs and higher education tax provisions

designed to assist students and families. Our review focused on three

questions: (1) What assistance do HOPE and Lifetime Learning tax credits

provide, and how do credit benefits compare to the tuition and fees that

students are charged, and to title IV aid they receive? (2) To what extent

do available policy and instructions provide clear guidance about the

impact of tax provisions on eligibility for title IV financial aid? (3) To what

extent is information available to Congress about the relative effectiveness

of title IV grants and loans and the HOPE and Lifetime Learning tax

credits?

To answer question one, we estimated the HOPE and Lifetime Learning

tax credits students received on the basis of the credits’ design and on

data in the National Postsecondary Student Aid Study (NPSAS). NPSAS

examines how students and their families pay for education and is based

on a nationally representative sample of students. Appendix I describes

our estimation methodology. We also used NPSAS to estimate the title IV

aid received by students considered to be financially dependent on their

parents and by financially independent students.2

 To answer question two,

we reviewed the HEA, Internal Revenue Code, title IV financial aid policies

and instructions developed by the Department of Education (Education),

and interviewed Education officials. To answer question three, we

reviewed studies of the effectiveness of title IV aid and the HOPE and

Lifetime Learning tax credits. We focused on their effects on college

attendance and choice, completion, and costs. These outcomes were

chosen because they have been the focus of congressional concern, as

expressed in committee reports, statutorily established study

commissions, and requests for our work from Congress. We also

 2

To be classified as an independent student in the title IV financial aid process, students

must meet one of the following criteria in academic year 2002-03: (1) veteran of armed

services; (2) born before January 1, 1979; (3) married; (4) enrolled in a graduate or

professional educational program; (5) have legal dependents other than a spouse; or (6) be

an orphan or ward of the court. Financial aid administrators may also classify students as

independents through the exercise of their professional judgment.
Page 3 GAO-02-751 Student Aid and Tax Benefits

interviewed Education and Department of Treasury (Treasury) officials

about their research and evaluation concerning title IV aid and tax credits.

Appendix II provides details about our review of the studies. We

conducted our work from August 2001 to July 2002 in accordance with

generally accepted government auditing standards.

In the 1999-2000 academic year, the Lifetime Learning and HOPE tax

credits provided, we estimate, more than 4 in 10 undergraduate students

with benefits that equaled a varying share of tuition and fees charged and

title IV aid received. Some students did not receive the credits on the

basis of their (or their family’s) income: those with incomes above

$100,000 were not eligible to claim the credits, and those with incomes

under $20,000 typically lacked a sufficient tax liability to use the credits.

Others received the credits, but obtained less than the credits’ maximum

value because their educational expenses were too small to make full use

of the credits. Among all dependent students who received the HOPE

credit, it equaled, on average, about 20 percent of the tuition and fees they

were charged, while among all independent students the HOPE credit

equaled 30 percent of the tuition and fees they were charged, according to

our estimates. Some students received both a tax credit and title IV aid.

For these students, HOPE credits equaled, on average, about one-fifth of

the face value of the title IV aid they received, while the Lifetime Learning

credit equaled about one-tenth of the face value of their title IV aid. As

figure 1 shows, title IV student aid and higher education tax credits, taken

together, now assist more than 70 percent of undergraduate students and

families in paying for postsecondary education.

Results in Brief
Page 4 GAO-02-751 Student Aid and Tax Benefits

Figure 1: Estimated Use of Higher Education Tax Credits and Title IV Student Aid

among All Undergraduates in 1999-2000

Note: See appendix I for our methodology used to generate credit estimates and the confidence

intervals associated with these estimates.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Available policy and instructions provide clear guidance about the impact

that several, but not all, tax provisions have on title IV aid eligibility. For

several higher education tax provisions, the HEA or Education’s policies

and instructions make clear how the use of tax provisions affects aid

eligibility. For some tax provisions, however, Education has not

established a policy on how their use affects aid eligibility, or it has

established a policy but not communicated it clearly to aid applicants.

Specifically, Education has not decided whether aid applicants should

report the untaxed earnings of state-sponsored college savings plans,

prepaid tuition plans, or Coverdell Educational Savings accounts when

applying for title IV aid, as is the case with other types of untaxed income.

As a result, those who wish to use these tax provisions are faced with

uncertainty about how this income affects aid eligibility. Education has

decided how assets in state-sponsored college savings plans, Coverdell

Educational Savings accounts, and Savings Bonds should be reported on

the title IV aid application form and used in calculating aid eligibility.

However, the form provides unclear instructions about who should report

the ownership of these assets, the student or parent. This may cause aid

applicants to err in reporting ownership of these assets, and result in their

14% • Tax credits and title IV aid

25% • Title IV aid only

28%• Neither credits nor title IV aid

33%

•

Tax credits only
Page 5 GAO-02-751 Student Aid and Tax Benefits

eligibility for aid being miscalculated. We make recommendations in this

report to address these problems.

Little information is available to Congress on the relative effectiveness of

title IV grants and loans and the HOPE and Lifetime Learning tax credits in

promoting postsecondary attendance, choice, and completion, or their

impact on college costs. This is due, in part, to the data and

methodological challenges intrinsic to conducting studies examining their

effects. Moreover, Education has conducted few evaluations of the title IV

aid programs, while Treasury has not yet examined the effects of higher

education tax credits. Using statistical techniques and research designs

that respond to these data and methodological challenges, academic

researchers have begun to produce findings about the impact of student

financial aid. For example, most studies that we reviewed found that grant

aid results in increased rates of college attendance, though estimates of its

magnitude vary. Education has focused its analysis of title IV programs on

program delivery, rather than impact. Lacking access to individual

taxpayer data, Education has been unable to analyze the use of higher

education tax credits or their effects. Treasury has access to taxpayer data

but has not used these data as a basis for evaluating the impact of tax

credits. In addition, Treasury does not possess data on the receipt of title

IV aid, limiting its capacity to assess the credits’ effects. As a result, little

information has been available to help Congress weigh the relative

effectiveness of grants, loans, and tax credits. We recommend that the

Secretaries of Education and Treasury take steps to address this lack of

information.

We provided Education and Treasury with a copy of our draft report for

review and comment. In written comments on our draft report, Education

and Treasury generally agreed with our reported findings and

recommendations. Education’s and Treasury’s comments appear in

appendix III and IV, respectively.

Education is the primary agency overseeing federal investments in support

of students enrolled in postsecondary education. Education’s grant and

loan programs are the largest source of student aid in the United States;

however, tax provisions recently enacted by Congress have created new

sources of support to assist students in paying for postsecondary

education. These two sources of student assistance—grants and loans, and

tax benefits—are intended to promote access to higher education and to

ensure its affordability. To help track progress toward these and other

goals, Education has developed strategic and performance goals in

Background
Page 6 GAO-02-751 Student Aid and Tax Benefits

accordance with the Government Performance and Results Act of 1993

(GPRA).3

Title IV of the HEA of 1965, as amended, authorizes the federal

government’s financial aid programs for postsecondary education. Title IV

programs include Pell grants for low-income students, parent loans known

as PLUS loans, and Stafford loans. Stafford loans may be either subsidized

or unsubsidized. The federal government pays the interest cost on

subsidized loans while the student is in school. The terms and conditions

of unsubsidized loans are the same as those for subsidized loans, but the

federal government does not pay the interest costs on the loan while the

student is in school; rather, students are responsible for all interest costs.

Title IV also authorizes programs funded by the federal government and

administered by participating higher education institutions, commonly

known as campus-based aid—Supplemental Educational Opportunity

grants (SEOG), Perkins loans, and federal work-study aid. In academic

year 1999-2000, Education awarded approximately $53 billion to students

through the title IV programs.

In order to receive title IV aid, a student must apply using the Free

Application for Federal Student Aid (FAFSA). Information from the

FAFSA is used to determine the amount of money—called the expected

family contribution (EFC)—that the student and/or the family is expected

to contribute to the student’s education. Statutory definitions establish the

criteria that students must meet to be considered independent of or

dependent on their parents for purposes of financial aid, and statutory

formulas establish the share of income and assets that are expected to be

available for the student’s education.4

 Once the EFC is established, it is

compared to the cost of attendance at the institution chosen by the

student. If the EFC is greater than the cost of attendance, the student is

not considered to have financial need for federal title IV aid programs. If

 3

GPRA seeks to improve the efficiency, effectiveness, and public accountability of federal

agencies as well as to improve congressional decision-making. To do so, the act outlines a

series of steps in which agencies are required to identify their goals, measure performance,

and report on the degree to which those goals were met.

4

For students classified as financially dependent on their parents, the EFC is based on the

income and assets of the student and parents. The student and parent EFC are computed

separately and then summed. For independent students with dependents, the EFC

calculation is similar to that of a parent of a dependent student. For independent students

without dependents, the EFC is based on a portion of their income and assets.

Title IV Aid
Page 7 GAO-02-751 Student Aid and Tax Benefits

the cost of attendance is greater than the EFC, then the student is

considered to have financial need. Financial aid administrators at the

student’s school then create a federal financial aid package that may

include grants, loans, and work-study. As part of the financial aid package

students may also receive state, institutional, or private aid.

In 1999-2000, about one in four undergraduates (23 percent) received

federal Pell or SEOG grant aid. Awarded on the basis of financial need,

these grants were highly targeted. About 75 percent of dependent students

receiving Pell and SEOG grants had family incomes of $30,000 or less,5

while three-quarters of independent students receiving them had incomes

of $20,000 or less.6

 Stafford loans were received by 28 percent of

undergraduates, and served a more varied population. A broad range of

dependent undergraduates made use of need-based (or subsidized)

student loans. Of the unsubsidized loans received by dependent

undergraduates, 60 percent were received by those with family incomes of

$60,000 or above per year. Of all loans received by independent students—

subsidized and unsubsidized—three quarters of their total dollar amount

went to students whose incomes were less than $30,000 per year.

In recent years Congress has enacted eight higher education tax

provisions that are specifically designed to help individuals and families

save for, repay, or meet the current costs of higher education, and

accomplish this by permitting tax filers to use their qualified educational

expenses to reduce their federal income tax liability (see table 1).

 5

Dependent students’ income is measured by parental income for 1998. If students applied

for financial aid, parental income was measured as adjusted gross income. See appendix I

for additional information on income measurement in NPSAS.

6

The income of independent students is that of the student and, if married, that of their

spouse, for 1998.

Tax Provisions
Page 8 GAO-02-751 Student Aid and Tax Benefits

Table 1: Selected Postsecondary Education Tax Provisions, 2002

Tax provision and

year of adoption Tax benefit

Definition of qualified

higher education

expense Who is eligible

Tax benefit is

phased out for filers

with modified

adjusted gross

incomes between

HOPE credit, 1997 Maximum credit: $1,500 per

student. Credit rate is 100

percent on first $1,000 of

qualified higher education

expenses, 50 percent on

next $1,000.

Nonrefundable: if filer has no

tax liability due to offsetting

deductions, exemptions, or

other tax credits, filer cannot

receive credit.

Tuition and fees at

institutions eligible to

participate in title IV

programs. Filers must

reduce qualified

expenses by the amount

of tax-free educational

assistance received.

Tax filer on behalf of self,

spouse, or dependent who

is working towards a

degree or certificate at least

half time in the first 2 years

of postsecondary

enrollment.

Single filera

$41-$52,000

Joint return:

$82-$102,000.

Lifetime Learning

credit, 1997

Maximum credit: $1,000 per

tax filer (20 percent of

qualified higher education

expenses up to $5,000). In

2003 maximum credit

increases to $2,000 per tax

filer (20 percent of qualified

higher education expenses

up to $10,000).

Nonrefundable: if filer has no

tax liability due to offsetting

deductions, exemptions, or

other tax credits, filer cannot

receive credit.

Tuition and fees at

institutions eligible to

participate in title IV

programs. Filers must

reduce qualified

expenses by the amount

of tax-free educational

assistance received.

Tax filer on behalf of self,

spouse, or dependent who

is enrolled in

undergraduate or graduate

courses, or any course that

aids in learning new or

improving existing job skills,

for as many years as the

student is enrolled.

Single filera

$41-$51,000

Joint return:

$82-$102,000.

Student loan interest

deduction, 1997

Maximum deduction: $2,500

Interest paid on eligible

education loans is

deductible.

Eligible loans are those

used to pay for tuition,

fees, room and board,

and related expenses

minus any scholarships

or grants received.

Tax filer, even those who

do not itemize, may deduct

interest paid.

Single filer:

$50-$65,000

Joint return:

$100-$130,000.

Exclusion for US

Series EE or I

Savings Bonds, 1988

Interest income from bonds

purchased after December

31, 1989, may be excluded

from income subject to

taxation if bond proceeds

are used to pay qualifying

higher education expenses.

Tuition and fees at

institutions eligible to

participate in title IV

programs. These must

be reduced by tax-free

educational assistance,

tax-free withdrawals from

a Coverdell ESA, and

expenses used in

figuring HOPE and

Lifetime Learning credits.

Similar to Lifetime Learning

credit.

The bond owner must be at

least 24 years old before

the bond’s issue date.

For tax-free

withdrawals, $57,600-

$72,000 for single

filers and $86,460-

$116,400 for joint

returns.
Page 9 GAO-02-751 Student Aid and Tax Benefits

Tax provision and

year of adoption Tax benefit

Definition of qualified

higher education

expense Who is eligible

Tax benefit is

phased out for filers

with modified

adjusted gross

incomes between

Prepaid tuition plans,

1996. (Also called

qualified tuition plans

or, section 529

plans.)

Earnings withdrawn from

prepaid plans when used to

pay for qualified higher

education expenses are free

from federal income taxation

after Dec. 31, 2001 for statesponsored programs, and

after Dec. 31, 2003 for

programs of private

institutions.

In general, tuition and

required fees. Room and

board if enrolled half time

or more. Specifics can

vary by plan. For

example, beneficiary

may be limited to

attending state public

colleges or any college in

a specific state.

Specifics depend on

particular plan. Normally a

plan is open for

contributions only on behalf

of young children and

accounts must be closed

within some number of

years after the beneficiary

reaches college age.

Not applicable.

State-sponsored

College Savings

Plans, 1996.

(Also called Qualified

Tuition Plans or,

Section 529 plans.)

Earnings withdrawn from

state-sponsored savings

plans when used to pay for

qualified higher education

expenses are free from

federal income taxation.

Tuition, fees, books,

supplies, and equipment

required for attendance.

Room and board if

enrolled half time or

more.

Same as Lifetime Learning

credit.

Not applicable.

Coverdell Education

Savings Accounts,

1997.

Account earnings and

distributions used for

qualified higher education

expenses are tax-free.

Annual contribution limit is

$2,000 per year per student

through age 17 (unless

special needs beneficiary).

Tuition, fees, books,

supplies, and equipment

required for attendance.

Room and board if

enrolled half time or

more.

Distributions from Coverdell

Education Savings

Accounts can be used for

students enrolled on fulltime, half time, or less than

half-time basis.

For contributions, $95-

$110,000 for single

filers and $190-

$220,000 for joint

returns.

Tax deduction for

tuition and fees,

2001.

Maximum deduction: $3,000

per return.

Tuition and fees at

institutions eligible to

participate in title IV

programs.

Same as Lifetime Learning

credit. For 2002-05,

taxpayers will have the

option of using either the

HOPE tax credit or the

tuition deduction.

Single filer:

$65,000

Joint Return:

$130,000.

a

Under the Taxpayer Relief Act of 1997, the income phase-out amounts are indexed to inflation.

Source: Internal Revenue Code, Department of Treasury, Joint Committee on Taxation, and

Congressional Research Service.

Education has a strategic goal that is particularly relevant to its title IV

programs, to “Enhance the Quality of and Access to Postsecondary

Education.” To ensure its progress toward this goal, Education has

developed annual goals that focus on (1) reducing the gaps in student

achievement and completion among students differing by race, ethnicity,

income, and disability; and (2) improving the effectiveness of its title IV

funding mechanisms in terms of, among other things, tuition prices and

borrower indebtedness.

Education’s Strategic and

Annual Performance Goals
Page 10 GAO-02-751 Student Aid and Tax Benefits

In the 1999-2000 academic year, more than 4 in 10 undergraduate students

received a higher education tax credit, according to our estimate. On

average, the HOPE tax credit equaled about 20 percent of the tuition and

fees that were charged to dependent students, and 30 percent of those

charged to independent students. The Lifetime Learning credit equaled

8 percent of tuition and fees charged to dependent students, and

11 percent for independent students. For both groups of students the

HOPE and Lifetime Learning credits comprised a larger share of the net

tuition and fees they paid—that is, tuition and fees charged, minus all

types of grant assistance. In addition to the credits, some students—about

14 percent—also received title IV aid. For these students, credit amounts

ranged from 4 to 26 percent of the face value7

 of the title IV aid that they

received. Taken together, credits and title IV student aid now assist about

7 out of 10 undergraduate students in meeting the costs of postsecondary

education.

According to our estimates, more than 4 in 10 undergraduate students

received a higher education tax credit in 1999-2000, a larger share of

students than participated in the federal government’s title IV programs.

About 29 percent received a Lifetime Learning tax credit, while 17 percent

received a HOPE tax credit. Students may receive title IV aid and a HOPE

or Lifetime Learning credit, and many did—an estimated 14 percent of

undergraduate students received both.

Not all undergraduates were eligible to receive a HOPE or Lifetime

Learning tax credit. One factor that affects eligibility is income. Students

from families with parents who filed jointly and had incomes above

$100,000 were ineligible to receive the credits. In addition, in order to

receive a credit, tax filers must have a positive tax liability. For a twoparent family with one dependent college student, federal income tax

 7

We report the face value of title IV loans awarded, rather than their economic subsidy

value to the student. Although title IV loans must be repaid, they can provide a subsidy by

offering funds to students who could not otherwise find lenders, and by offering lower

interest rates than are available in the non-title IV private loan market. In contrast to grants

and tax credits, which provide subsidies that are equal to their face values, loans provide

subsidies that are considerably less, on average, than their face values. Dynarski (“Loans,

Liquidity, and Schooling Decisions,” February 2002) calculates that the subsidy for loans of

average riskiness is equal to about 30 percent of the face value for subsidized Stafford

loans and about 15 percent for unsubsidized Stafford loans. Cameron and Heckman (1999)

put the subsidy value at about a third of the amount of loans disbursed.

Hope and Lifetime

Learning Credits

Provide Benefits for a

Substantial Portion of

Undergraduate

Students

HOPE and Lifetime

Learning Tax Credits Were

Received by Many, but Not

All
Page 11 GAO-02-751 Student Aid and Tax Benefits

liability began in 2000 at about $15,750.8 As shown in figures 2 and 3, a

small proportion of those dependent students whose family incomes were

below $20,000 received the credits.

Figure 2: Percent of All Undergraduate Students Receiving HOPE Credit

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental adjusted gross income (AGI); independent income equals

1998 student AGI and, if married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

 8

Assuming the family filed a joint return and used a standard deduction.

Percent

0

5

10

15

20

25

30

35

40

45

50

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Incomea

4

9

27

18

33

16

34

12

32

14

Dependent

Independent
Page 12 GAO-02-751 Student Aid and Tax Benefits

Figure 3: Percent of All Undergraduate Students Receiving Lifetime Credit

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Figures 4 and 5 show that students who received the credits did not

necessarily receive the full amount. Students may not have a sufficiently

large tax liability or qualified educational expenses necessary to receive a

tax credit’s full value. Tax filers must have qualified educational expenses

of $2,000 per student to receive the maximum HOPE credit, while they

must have $5,000 of qualified expenses (for themselves or others claimed

on their return) to receive the maximum value of the Lifetime Learning

credit. Tax filers must subtract the nontaxable aid they received, such as

Pell grants or scholarships, from qualified educational expenses. The

reduction of qualified educational expenses by nontaxable aid reduces the

number of students who might otherwise receive the credits, and it

reduces the credit amounts obtained, particularly, we estimate, among

dependent students with family incomes in the $10-$50,000 range.

Percent

0

5

10

15

20

25

30

35

40

45

50

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Incomea

Dependent

Independent

5

19

29

46

33

48

32

48

39

42
Page 13 GAO-02-751 Student Aid and Tax Benefits

Figure 4: Average Amount of HOPE Credit Received by Dependent and Independent

Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Dollars

0

 125

 250

 375

 500

 625

 750

 875

1,000

1,125

1,250

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

Dependent

Independent
Page 14 GAO-02-751 Student Aid and Tax Benefits

Figure 5: Average Amount of Lifetime Learning Credit Received by Dependent and

Independent Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals student 1998 AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

For the 47 percent of all undergraduates who received a tax credit in

1999-2000, the higher education tax credits equaled a varying share of the

tuition and fees. On average, the HOPE tax credit equaled about 20 percent

of the tuition and fees that were charged to dependent students, and

30 percent of independent students’ tuition and fee charges. The Lifetime

Learning credit equaled 8 percent of tuition and fees charged to dependent

students, and 11 percent for independent students. Many students receive

private, institutional, state, and federal grants that reduce the tuition and

fee costs that they must pay out of their own resources. In claiming the

HOPE and Lifetime Learning credits, tax filers must reduce their qualified

educational expenses, tuition and fees, by these (and any other) forms of

nontaxable aid. We calculated students’ net tuition and fees as the tuition

and fees they were charged minus all private, institutional, state, and

Credits Equaled a Varying

Share of Tuition and Fees

Dollars

0

125

250

375

500

625

750

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

Dependent

Independent
Page 15 GAO-02-751 Student Aid and Tax Benefits

federal grant aid they received. We estimate that the HOPE credit equaled,

on average, 28 percent of dependent students’ net tuition and fees, and

36 percent of independent students’ net tuition and fees. The Lifetime

Learning credit equaled about 12 percent of dependents’ net tuition and

fees, and 15 percent of independents’ net tuition and fees. Figure 6

compares the estimated HOPE credit to the total tuition and fees charged

to dependent students, and to the net tuition and fees they paid. Figure 7

presents the same comparisons for independent students. Figure 8

compares the estimated Lifetime Learning credits received to the total

tuition and fees charged to dependent students, and to the net tuition and

fees they paid. Figure 9 presents the same comparisons for independent

students.

Figure 6: HOPE Credit as a Percent of Tuition and Fees Charged and Net Tuition

and Fees Paid by Dependent Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Percent

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

Percent of tuition and fees charged

Percent of net tuition and fees paid

0

10

20

30

40

50

60

6

12

20

31

21

31

22

32

12

15
Page 16 GAO-02-751 Student Aid and Tax Benefits

Figure 7: HOPE Credit as a Percent of Tuition and Fees Charged and Net Tuition

and Fees Paid by Independent Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Percent

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

0

10

20

30

40

50

60

21

26

34

41

39

43 44

50

25

28

Percent of tuition and fees charged

Percent of net tuition and fees paid
Page 17 GAO-02-751 Student Aid and Tax Benefits

Figure 8: Lifetime Learning Credit as a Percent of Tuition and Fees Charged and Net

Tuition and Fees Paid by Dependent Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Percent

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

0

2

4

6

8

10

12

14

16

18

5

9 9

14

9

13

10

13

5

6

20

Percent of tuition and fees charged

Percent of net tuition and fees paid
Page 18 GAO-02-751 Student Aid and Tax Benefits

Figure 9: Lifetime Learning Credit as a Percentage of Tuition and Fees Charged and

Net Tuition and Fees Paid by Independent Students

Note: See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Approximately 14 percent of undergraduate students received both title IV

aid and a higher education tax credit in 1999-2000; for these students, the

HOPE and Lifetime Learning tax credits equaled a varying share of the

face value of the title IV aid they received. The HOPE credit equaled, on

average, about one-fifth of the average title IV aid received by students.

The Lifetime Learning tax credit provided a smaller benefit relative to title

IV aid than the HOPE credit, equaling, on average, about one-tenth of the

title IV aid received by dependent and independent students. For

dependent students with family incomes of $20,000-$40,000, we estimate

that the average HOPE credit ($924) was larger than the average title IV

grant award ($569). For students with family incomes of $40,000-$80,000,

For Title IV Recipients,

Higher Education Tax

Credits Equaled a Varying

Share of Their Aid

Percent

$0-19,999 $20-39,999 $40-59,999 $60-79,999 $80-99,999

Income a

0

2

4

6

8

10

12

14

16

18

10

13 13

16

13

16

14

17

8

11

20

Percent of tuition and fees charged

Percent of net tuition and fees paid
Page 19 GAO-02-751 Student Aid and Tax Benefits

who typically do not receive grant aid, the HOPE credit provides a

significant benefit in comparison to the face value of their federal loan

assistance. Figures 10 and 11 show, for dependent and independent

students, the estimated HOPE credit and title IV grant and loan aid

amounts received. Figures 12 and 13 compare the estimated Lifetime

Learning credit and title IV grant and loan aid amounts received by

dependent and independent students.
Page 20 GAO-02-751 Student Aid and Tax Benefits

Figure 10: HOPE Credit and Title IV Grant and/or Loan Assistance, Dependent

Students Receiving Both

Notes: These calculations report the face value of loans, rather than their economic subsidy value to

the student. Recent estimates of the economic subsidy value of title IV student loans put the value at

about 15 to 30 percent of the face value of the loan, depending upon the type of loan.

See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Dollars 

 0

 500

1,000

1,500

2,000

2,500

3,000

3,500

Mean credit

Mean loan

Mean grant

Income a

$20,000-39,999

$40,000-59,999

$60,000-79,999

$80,000-99,999

$0-19,999
Page 21 GAO-02-751 Student Aid and Tax Benefits

Figure 11: HOPE Credit and Title IV Grant and/or Loan Assistance, Independent

Students Receiving Both

Notes: These calculations report the face value of loans, rather than their economic subsidy value to

the student. Recent estimates of the economic subsidy value of title IV student loans put the value at

about 15 to 30 percent of the face value of the loan, depending upon the type of loan.

See appendix I for confidence intervals associated with these estimates.

a

Independent income equals 1998 student AGI and, if married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Dollars 

Mean credit

Mean loan

Mean grant

Income a

 0

 500

1,000

1,500

2,000

2,500

$20,000-39,999

$40,000-59,999

$60,000-79,999

$80,000-99,999

$0-19,999
Page 22 GAO-02-751 Student Aid and Tax Benefits

Figure 12: Lifetime Learning Credit and Title IV Grant and/or Loan Assistance,

Dependent Students Receiving Both

Notes: These calculations report the face value of loans, rather than their economic subsidy value to

the student. Recent estimates of the economic subsidy value of title IV student loans put the value at

about 15 to 30 percent of the face value of the loan, depending upon the type of loan.

See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

$20,000-39,999

Dollars 

 0

 500

1,000

1,500

2,000

2,500

3,000

3,500

Mean credit

Mean loan

Mean grant

Income a

$40,000-59,999

$60,000-79,999

$80,000-99,999

$0-19,999
Page 23 GAO-02-751 Student Aid and Tax Benefits

Figure 13: Lifetime Learning Credit and Title IV Grant and/or Loan Assistance,

Independent Students Receiving Both

Notes: These calculations report the face value of loans, rather than their economic subsidy value to

the student. Recent estimates of the economic subsidy value of title IV student loans put the value at

about 15 to 30 percent of the face value of the loan, depending upon the type of loan.

See appendix I for confidence intervals associated with these estimates.

a

Dependent income equals 1998 parental AGI; independent income equals 1998 student AGI and, if

married, spouse’s AGI.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Dollars 

Mean credit

Mean loan

Mean grant

Income a

 0

 500

1,000

1,500

2,000

2,500

$20,000-39,999

$40,000-59,999

$60,000-79,999

$80,000-99,999

$0-19,999
Page 24 GAO-02-751 Student Aid and Tax Benefits

About 6 out of 10 undergraduates did not receive title IV student

assistance in 1999-2000. We estimate that slightly more than half of these

students received a higher education tax credit. Among those dependent

students who received no federal financial aid, the HOPE tax credit

equaled about 25 percent of the tuition and fees they were charged, while

among independents this share was nearly 50 percent. The Lifetime

Learning tax credit equaled a smaller share of tuition and fees charged to

both, 10 percent and 14 percent, respectively.

Available policy and instructions provide clear guidance about the impact

of several higher education tax provisions on eligibility for title IV aid, but

in a few instances they do not. Education has not established a policy on

how the income that students and parents report as part of the expected

family contribution is affected by the tax-free earnings of state savings

plans, prepaid tuition plans, and Coverdell accounts. As a result, those

who wish to use these provisions are faced with uncertainty about how

using them affects title IV aid eligibility. Although Education has

established policies about the ownership of these assets for the purpose of

calculating the EFC, these policies have not been clearly communicated to

aid applicants. Specifically, families who choose to use state savings

plans, Coverdell accounts, and Series EE Savings Bonds receive unclear

instructions on the FAFSA form about who should claim these assets, the

student or parent(s). As a result, they may err when reporting these assets,

and their eligibility for aid may be miscalculated.

For many of the higher education tax provisions that we reviewed, the

HEA or Education’s guidance make clear how their use affects aid

eligibility. The HEA prohibits including HOPE and Lifetime Learning tax

credits as income or assets in the computation of EFC.9

 In contrast, the act

specifies that assets in a tuition prepayment plan do reduce students’

eligibility for title IV aid because they reduce students’ cost of attendance.10

In specifying how federal taxation affects the EFC, the HEA also accounts

for the effects of two other tax provisions: the student loan interest

deduction and the higher education tax deduction. Under the rules of the

 9

The act also prohibits including the credits as financial assistance in the award of title IV

aid.

10Each dollar of qualified educational expenses paid from a prepaid tuition plan reduces the

student’s cost of attendance by the same amount. This results in a reduction in the

student’s calculated financial need and aid eligibility.

For Students Who Did Not

Receive Title IV Aid,

Credits Equaled, on

Average, from One-Tenth

to One-Half of the Tuition

and Fees They Were

Charged

Available Policy and

Instructions Provide

Clear Guidance about

the Impact of Several,

but Not All, Tax

Provisions on

Eligibility for Title IV

Aid
Page 25 GAO-02-751 Student Aid and Tax Benefits

federal financial aid methodology, aid applicants reduce their reported

income by federal income and payroll taxes, and by an allowance for state

taxes. The use of these tax provisions lowers an applicant’s tax liability

and their adjusted gross income, reducing their EFC and increasing their

aid eligibility.11 The HEA also specifies that interest on tax-free bonds,

including Savings Bonds, must be reported as part of the untaxed income

included in the EFC. As a result, the HEA makes clear that the use of

Series EE Savings Bonds increases an aid applicant’s EFC, and reduces

their aid eligibility.

In a few instances, neither the HEA’s financial aid methodology nor

Education’s policies establish how parents’ and students’ use of certain tax

provisions—state savings plans, prepaid tuition plans, and Coverdell

accounts—affects their eligibility for title IV aid. Before January 2002, the

earnings portion of prepaid tuition and state savings plans was taxable

upon distribution. As part of the student’s taxable income, it was reported

on the FAFSA form and included in the calculation of the EFC. After

January 2002, in accordance with the Economic Growth and Tax Relief

Reconciliation Act, the earnings of these plans were no longer subject to

federal taxation. Education has not yet determined whether interest

earned on prepaid tuition plans, savings plans, or Coverdell accounts

should be reported on the FAFSA form and included in the calculation of

EFC as a type of untaxed income.12 As a result, those who use either tax

provision cannot predict whether interest earnings from these plans will

increase the income that they report on the FAFSA, thereby increasing

their EFC and reducing eligibility for most title IV aid.

For state savings plans and Coverdell accounts, as well as Series EE

Saving Bonds, the FAFSA form does not provide clear instructions for

reporting to whom these assets belong, the student or parent. The FAFSA

has a single set of instructions directing parents and students to report

their assets, including state savings plan assets, bonds, and Coverdell

accounts. However, the instructions do not indicate who should claim

 11Both tax deductions reduce an applicant’s tax liability and AGI. The first of these changes

increases the EFC, while the second reduces it. The net effect of these two changes is to

reduce the applicant’s EFC.

12HEA’s financial aid methodology includes some forms of untaxed income in the

calculation of the EFC, such as tax-exempt interest income (from IRS 1040, line 8b) and a

variety of governmental payments (worker’s compensation, untaxed portions of railroad

retirement benefits, and Black Lung benefits).
Page 26 GAO-02-751 Student Aid and Tax Benefits

which assets.13 As a result, parents may claim assets that should be

reported as student assets, or vice versa. A mistake of this type has

consequences because the HEA specifies that a larger share of student

assets is to be included in the EFC than parental assets.14 Errors in

reporting of these assets on the FAFSA may result in a miscalculation of

the EFC, and students receiving more or less aid than they would if the

assets were correctly reported.

Little information is available to Congress on the relative effectiveness of

title IV grants and loans and the HOPE and Lifetime Learning tax credits in

promoting postsecondary attendance, choice, and completion, or their

impact on college costs. Data and methodological challenges make it

difficult to isolate the impact of grants, loans, and tax credits. Some

academic research has addressed these challenges, and developed

evidence about the effects of student assistance, chiefly grant aid. Our

review of research found little work undertaken by Education to assess

the effectiveness of title IV programs. Treasury has studied the impact of

some tax provisions, but has not yet done so for the HOPE or Lifetime

Learning tax credits. As a result, Congress has little information to help it

weigh the relative effectiveness of these policy tools.

Data and methodological challenges make it difficult to identify the impact

of grants, loans, and tax credits on college attendance and choice,

completion, or costs. Many factors in addition to financial aid may

influence college-going decisions, including academic preparation, family

income and wealth, and the expected costs and benefits of college

attendance. To isolate the effect of financial aid on college attendance, for

example, researchers need data about each of these factors—both for

those who chose to attend college and those who did not. National surveys

do not contain complete data on all of these factors for those who attend

 13Education’s Web-based instructions in support of the FAFSA form do, however, provide

clear guidance about the ownership of state savings plan assets. The instructions are

available at http://www.ed.gov/prog_info/SFA/FAFSA/instr02-03/step4_4.html

14If reported as the asset of a dependent student, 35 percent of net state savings plan assets

would be counted toward the EFC; if reported as a parental asset, between 2.64 percent

and 5.64 percent of their net value would be counted toward the EFC. Incorrectly reporting

this asset as a student asset would result in an EFC that is larger than it should be, and an

erroneously small estimate of financial need.

Little Information Is

Available to Congress

on the Relative

Effectiveness of Title

IV Grants, Loans, and

Hope and Lifetime

Learning Tax Credits

Identifying Impact of

Grants, Loans, and Tax

Credits Is Difficult, and

Little Is Known Beyond the

Effects of Grants on

Attendance
Page 27 GAO-02-751 Student Aid and Tax Benefits

and do not attend college.15 Moreover, researchers have little evidence

about how postsecondary institutions respond to changes in the

availability of federal aid. Despite such challenges, researchers have begun

to establish a body of findings about the effects of federal aid, much of it

focusing on the effects of grant aid. They have done so by using a variety

of statistical techniques and research designs16 that mitigate these

challenges.

Much of the research we identified examined the impact of grants on

attendance. While some studies conclude that grants have not had a large

effect on college attendance,17 most indicate that grants have a positive

impact on attendance, though their estimates of its magnitude vary. Recent

research by Dynarski (2001) and Seftor and Turner (2002) found that

changes in grant aid significantly increased the probability that recipients

would attend college.18

Little is known about the effects of the higher education tax credits on

college attendance and choice, completion or costs. No studies we

identified used individual taxpayer data, collected after the credits were

enacted, to estimate any of these effects. A few researchers have

simulated the effects of the HOPE tax credit on rates of college

 15Surveys that focus on educational choices and outcomes have sparse information on

potential students’ parental resources and academic ability. See Sarah E. Turner, “Federal

Financial Aid: How Well Does It Work?”, John C. Smart (ed), Higher Education: Handbook

of Theory and Research, vol. XVI (New York: Agathon Press, 2001.

16For example, several recent studies use a quasi-experimental design attempting to isolate

the effects of financial aid policy changes. See Susan Dynarski, “Does Aid Matter?

Measuring the Effect of Student Aid on College Attendance and Completion.” John F.

Kennedy School of Government, Harvard University Working Paper (RWP01-034),

September 2001; and Neil S. Seftor and Sarah E. Turner, “Back to School: Federal Student

Aid Policy and Adult College Enrollment,” The Journal of Human Resources 37 (2002):

336-352. Other studies explicitly model student college attendance decisions to correct for

potential bias from incomplete data. See Stephen V. Cameron and James J. Heckman, “The

Dynamics of Educational Attainment for Black, Hispanic, and White Males.” Journal of

Political Economy, 109, no. 3 (2001): 455-499. Charles Manski and David Wise, College

Choice in America. Cambridge, Massachusetts: Harvard University Press, 1983.

17See Kane (1999). Cameron and Heckman (2001) estimate that “a $1,000 increase in Pell

grant entitlements produces less than a 1 percent increase in enrollments...”

18Dynarski studied the effects of the elimination of the Social Security student benefit

program in 1982, and concluded that the offer of a $1,000 grant (year 2000 dollars) would

increase the probability of attending college by 3.6 percentage points. Seftor and Turner

find that changes in the availability of Pell grants had sizeable effects on the college

enrollment of older, independent students.
Page 28 GAO-02-751 Student Aid and Tax Benefits

attendance. One simulation estimated that 90 percent of the cost of the

HOPE credit is received by students who would have attended college in

its absence.19 None of the studies that we reviewed examined whether the

credits have influenced the type of institution that students choose to

attend or their rates of college completion. Moreover, none examined

whether the credits have made college more affordable for recipients or

have led instead to offsetting tuition increases or reductions in

institutional aid to credit recipients.

Education is authorized to conduct studies on the impact of title IV

programs; however, it has focused primarily on customer service and

program delivery for two reasons. First, Congress has consistently

expressed concern about the management and financial integrity of the

title IV programs.20 A second reason, according to Education, is that it is

difficult to “isolate the behavioral effects of title IV aid programs.”

Therefore, Education has chosen to “assess the effectiveness of the

student aid programs without attempting to establish a causal link

between program funding and achievement of specific outcomes.”21 As

discussed earlier, academic researchers facing the same methodological

challenges have begun to produce a body of findings.

Because it lacks reliable data on the individuals using higher education tax

credits, Education is unable to determine how tax credits affects college

attendance and choice, completion, and costs. Section 6103(a) of the

Internal Revenue Code prohibits the Internal Revenue Service, without

congressional authorization, from sharing individual taxpayer data with

Education. Education has attempted to collect information on the use of

tax provisions by incorporating questions about their use into the student

survey component of the NPSAS. Dependent students are often unfamiliar

with how their parents use tax benefits and, as a result, the information

they provide on surveys is unreliable.

 19Cameron and Heckman’s simulation leads them to conclude, “The estimated enrollment

response to the HOPE program is a 4.2 percentage point increase in two-year enrollments

and a 0.9 percentage point decrease in four-year enrollments (3.3 increase for both

categories combined).”

20Over the last several years, we have frequently reported to Congress on these issues. See,

for example, U.S. General Accounting Office, Major Management Challenges and Program

Risks: Department of Education, GAO-01-245 (Washington D.C.: January 2001).

21U.S. Department of Education, Planning, and Evaluation Service, Biennial Report, 1995-96.

(As of 2002, this continued to be Education’s position.)

Education and Treasury

Have Not Focused on

Impact of the Federal

Grants, Loans, and Higher

Education Tax Credits
Page 29 GAO-02-751 Student Aid and Tax Benefits

Treasury has access to individual taxpayer information, from which data

on the use of higher education tax provisions can be calculated. Although

Treasury has studied the effects of other tax credits, it has not examined

the HOPE or Lifetime Learning credits since their implementation in 1998.22

Treasury does not possess data on the receipt of title IV aid for those tax

filers who use higher education tax credits, limiting its capacity to assess

the credits’ effects. Treasury has indicated that its primary evaluation

priority is the impact of tax provisions on rates of saving. It has no work

underway, or scheduled, to evaluate the impact of higher education tax

credits.

Higher education tax provisions are an important new tool in helping

many students and families meet the costs of postsecondary education.

Millions now receive higher education tax credits, and millions are now

saving for college using a variety of other tax provisions. In the future a

growing share of students and families may be making combined use of

tax credits, other tax provisions and title IV aid. Although many of these

tax provisions have clear consequences for title IV aid eligibility, some do

not. Lacking clear guidance about the impact of some tax provisions on

aid eligibility, some families may find it difficult to plan how they will pay

for college. Faced with unclear instructions about reporting their use of

tax provisions, some students may make errors that result in inaccurate

awards of aid. As an increasing share of students use both aid and tax

provisions, more families will be faced with uncertainty about aid

eligibility and potential errors in aid awards. Education has the capacity to

address both of these problems.

The adoption of higher education tax provisions creates new opportunities

and choices for federal policymakers, providing them with a range of tools

to accomplish their objectives. For Congress to weigh the relative

effectiveness of these policy tools, it must receive information about who

these tools serve and their impact. Congress does not yet have this

information available to it. Several questions likely to be important to

Congress remain to be fully addressed, including:

 22Treasury was mandated by P.L. 104-188 to “study the effect on adoptions” of the two

adoption tax provisions: a tax credit for qualified adoption expenses and an exclusion for

employer-paid or reimbursed adoption expenses. The study was prepared in consultation

with the Department of Health and Human Services, and released in October 2000. Report

to the Congress on Tax Benefits for Adoption,

http://www.treas.gov/taxpolicy/library/adoption.pdf.

Conclusions
Page 30 GAO-02-751 Student Aid and Tax Benefits

Does the provision of student assistance—grants, loans, or tax

credits—result in levels of postsecondary attendance greater than

would otherwise occur, and are some forms of assistance more

effective at promoting attendance than others?

Do changes in the availability of student assistance influence the types

of institutions that students choose to attend?

Do changes in the availability of student assistance affect whether

students complete their postsecondary education?

How do postsecondary institutions respond to the changes in the

availability of federal student assistance? Have grant and loan

increases, or the introduction of tax credits, resulted in tuition

increases or reductions in institutional aid to grant, loan and credit

recipients and, if so, to what degree?

Noting the difficulty of showing the link between title IV spending and

outcomes, Education has undertaken little work identifying the impact of

its grant and loan programs. As a result, it cannot fully assess its progress

in achieving its strategic goal to “Enhance the Quality of And Access to

Postsecondary Education.” Moreover, Treasury and Education have not

collaborated to provide Congress with evidence about the impact of higher

education tax credits and title IV student aid. Determining whether there is

a causal link between program and tax expenditures and desired

outcomes is difficult, but not impossible. Given an annual investment of

billions of dollars—in outlays and revenues foregone—studying their

effectiveness is warranted.

To ensure that students and families understand how using tax provisions

will affect their eligibility for title IV financial aid, we recommend that the

Secretary of Education develop a policy specifying whether the tax-free

earnings of state-sponsored college savings plans, tuition prepayment

plans, and Coverdell Education Savings Accounts should be included in

the calculation of the EFC and, therefore, reported by aid applicants as

untaxed income on the FAFSA form. In addition, we recommend that the

Secretary clarify FAFSA instructions, clearly explaining who should report

ownership of the assets held in state-sponsored savings plans, Coverdell

education savings accounts, and Series EE Savings Bonds.

In order to provide Congress with information about the effectiveness of

its title IV programs as well as to ensure its programs are achieving results,

Recommendations to

the Secretaries of

Education and

Treasury
Page 31 GAO-02-751 Student Aid and Tax Benefits

we recommend that the Secretary of Education sponsor research on the

impact of title IV programs on postsecondary education attendance and

choice, completion, and costs.

In order to provide Congress with information about the relative

effectiveness of Education’s direct expenditure programs and Treasury’s

higher education tax provisions, we recommend that the Secretaries of

Education and Treasury collaborate in studying the impact of tax credits

and title IV student aid programs on college attendance and choice,

completion, and costs. As a first step, the Secretaries will need to identify

opportunities for, and limits to, the sharing of data, and develop a plan to

address them.

In their written comments, Education and Treasury noted that the report

was useful and informative, and generally agreed with our findings and

recommendations. In response to our recommendation that Education

develop policy and clarify instructions on how the use of certain tax

provisions affect title IV aid eligibility, Education stated that it would take

advantage of the opportunity provided by the upcoming HEA

reauthorization to comprehensively review how families now pay for

college and, consequently, the title IV student aid eligibility formulas.

Regarding our recommendation that Education sponsor research on the

effectiveness of title IV programs, Education indicated that it would

identify opportunities to sponsor such research, including how the federal

investment affects students’ postsecondary education attendance and

completion as well as institutions’ tuition and financial aid behavior. In

response to our recommendation that Education and Treasury collaborate

in studying the impact of tax credits and title IV student aid programs,

Treasury said that such an effort would be beneficial. Treasury also noted

that it would take time and staff resources to develop a useful longitudinal

database, and that the confidentiality of individuals’ tax return information

must always be protected. Education noted that it recently collaborated

with Treasury in developing a legislative proposal that would allow the

agencies to match income information contained on tax returns with title

IV student aid application data for the purpose of reducing erroneous

payments to individuals participating in the title IV programs. Education

said it looked forward to future collaborations with Treasury.

We are sending copies of this report to the Secretaries of Education and

Treasury and other interested parties. We will also make copies available

Agency Comments
Page 32 GAO-02-751 Student Aid and Tax Benefits

to others upon request. In addition, this report will be available at no

charge on the GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me on

(202) 512-8403. Other contacts and acknowledgments are listed in

appendix V.

Cornelia M. Ashby

Director, Education, Workforce,

 and Income Security Issues
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 33 GAO-02-751 Student Aid and Tax Benefits

All estimates of title IV student financial aid are based upon the 1999-2000

National Postsecondary Student Aid Study (NPSAS). NPSAS is a

comprehensive study that examines how students and their families pay

for postsecondary education. It includes nationally representative samples

of 50,000 undergraduates, and 12,000 graduate and first-professional

students enrolled at approximately 1,000 postsecondary institutions during

the 1999-2000 academic year. The data are based on student interviews

and administrative records, and NPSAS contains both students who

received financial aid and those who did not. Title IV financial aid included

Pell and SEOG grants, Stafford loans, PLUS loans, and federal work-study

assistance. In reporting on title IV loans, we indicate the face amount of

the loans received.

We computed estimates of the HOPE and Lifetime Learning credits

received by students using data from NPSAS. NPSAS data are collected at

the individual student level, and cannot be aggregated into families or

linked to tax filing status. Therefore, our analysis treated individual

students as if they were the credit claimants and recipients. Credit

amounts for each student in NPSAS were computed by calculating a

completed Internal Revenue Service (IRS) form 8863, the form used by tax

filers to claim the credits, for each student in the NPSAS sample. We

determined a student’s eligibility for the HOPE credit on the basis of

enrollment status and year in school. We subsequently assumed that all

students not eligible for the HOPE credit were potentially eligible for the

Lifetime Learning credit.

After establishing eligibility for students in the database, we determined

the maximum tax credit each student could receive using the formulas

contained in the IRS form 8863, applying the income eligibility

requirements associated with these credits. Form 8863 uses adjusted gross

income (AGI) for these measures, which is all income minus exclusions

from income such as student-loan interest and IRA contributions. For

one-half of students in the NPSAS database who filed a Free Application

for Federal Student Aid (FAFSA), NPSAS reports the adjusted gross

income for the student (and spouse) if they are independent, or the

parents (if the student is a dependent). For the other half of students,

income is based on a computer-assisted telephone interview, and/or

stochastic imputation.

In addition to income, the amount of credit allowed is limited by the

amount of tax liability reduced by amounts of dependent care and the

elderly and disabled credits claimed. Generally speaking, tax liability is tax

owed on a filer’s taxable income, which is their AGI minus personal

Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 34 GAO-02-751 Student Aid and Tax Benefits

exemptions and either the standard deduction or the sum of itemized

deductions such as mortgage interest or property taxes. Without tax data

we had no means of estimating potential itemized deductions, so we

assumed that all tax filers used the standard deduction. We calculated the

amount of liability owed using the standard tax tables provided by the IRS.

There is no information in NPSAS about the amount claimed for

dependent care and the elderly and disabled tax credits. We therefore

assumed that these returns only had education tax credits.

The steps above allowed us to calculate a tax credit for every student in

the NPSAS sample. We estimated that approximately 90 percent of the

students in the NPSAS sample who were eligible to claim the credits did

so. We had no reliable evidence about different rates of tax credit use

across family income or student type; therefore, we randomly selected a

90 percent sample of those students who had a non-zero credit to be the

population of credit recipients used to calculate our tax credit estimates.

The results of our estimation were compared to data on credits claimed

and allowed, computed from the Statistics of Income (SOI) and provided

to us by the IRS. Our estimate of the net value of HOPE and Lifetime

credits allowed was 94 percent of the SOI estimate. Our estimates of

HOPE credits claimed was significantly lower than the SOI estimate, while

our estimate of Lifetime Learning credits claimed was significantly higher

than the SOI estimate.

Some aspects of our methodology tend to overstate the credit amounts

claimed, while others aspects of the methodology have the opposite effect.

Tax filers who had more than one family member enrolled in

postsecondary education were able to apply the qualified education

expenses of each to the Lifetime Learning tax credit, up to a $5,000 per

household limit. NPSAS data do not allow individual student records to be

linked into households. Therefore, we were unable to adjust our estimates

of students’ qualified educational expenses to reflect this feature of the

credit. Our estimates of total Lifetime Learning credit amounts were larger

than those estimated from the SOI; some of this overestimation may have

resulted from this limitation.

Tax filers using either the HOPE or Lifetime Learning credit may find that

they are unable to obtain the full value of the credit because they lack

sufficient tax liability to do so. Our methodology assigns the tax liability of

each family to one student, regardless of the number of family members

actually enrolled. For those families that had more than one student

Limitations of Our Analysis
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 35 GAO-02-751 Student Aid and Tax Benefits

enrolled, our methodology may overestimate the tax liability available to

the student and thus overestimate the credit received.

We assumed that all tax filers used the standard deduction. Our estimates

of pre-credit tax liability among those with adjusted gross incomes of

$20-30,000 were 17 percent lower than SOI’s, and 8 percent lower for tax

filers with adjusted gross incomes of $30-$40,000. Our estimates of tax

liability were slightly higher than those of SOI at AGIs above $75,000. This

may result in an underestimation of the credits claimed by tax filers with

adjusted gross incomes below $40,000.

Some individuals who are eligible to claim the credit may not do so. There

are no reliable data on the rate at which eligible tax filers claim the HOPE

and Lifetime Learning credits. Our methodology estimated that 90 percent

of the students in the NPSAS sample who were eligible to claim the credits

did so. We first calculated a credit amount for all students. Lacking any

empirical basis for establishing different rates of credit usage among

students, we randomly selected a 90 percent sample of students who had a

non-zero credit to be the population of credit recipients used to calculate

our tax credit estimates. To the extent that the rate of usage varies across

student populations by income or dependency status, our estimates of

credit amounts will be too small for some populations, and too large for

others.

Data limitations may also affect the quality of tax credit estimates. Our

estimates of tax credits may be lower than those obtained from the SOI

because SOI data represent pre-audited amounts, and tax filers may have

over claimed the credits. While income data for those students who did

apply for federal financial aid is reported by NPSAS to be very precise, for

the other half of students the income information is acknowledged by

NPSAS to be much less reliable. This lack of reliability in the measurement

of income may result in imprecise estimates of credit usage and credit

amounts received.

Because our estimates come from a sample of the larger population,

NPSAS, there is some sampling error associated with them. Moreover,

taking a 90 percent sample of those data introduces additional sampling

errors. In calculating sampling errors and confidence intervals, we took

into account this complex sample design. Sampling errors are often

represented as a 95 percent confidence interval: an interval that 95 times

out of a 100 will contain the true population value. The upper and lower

bounds of the 95 percent confidence intervals for each estimate are

presented in the following tables.
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 36 GAO-02-751 Student Aid and Tax Benefits

Table 2: Estimated Use of Tax Credits and Title IV Aid Among All Undergraduates in

1999-2000

(In percentages)

Income category

Lower and upper bounds of

95 percent confidence interval

Tax Credits and Title IV Aid 13.86-14.53

Tax Credits Only 32.23-33.36

Title IV Aid Only 24.39-25.33

Neither Credits Nor Title IV Aid 27.62-28.69

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 3: Percent of All Undergraduate Students Receiving HOPE Credit

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category Dependent Independent

$0-19,999 2.85-5.15 8.09-10.19

$20-$39,999 24.71-28.87 15.96-19.15

$40-$59,999 30.72-34.89 13.60-17.95

$60-$79,999 31.61-36.82 9.45-14.80

$80-$99,999 29.02-34.53 9.10-21.25

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 4: Percent of All Undergraduate Students Receiving Lifetime Learning Credit

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category Dependent Independent

$0-19,999 3.61-6.77 17.59-20.24

$20-$39,999 27.18-31.21 43.45-47.68

$40-$59,999 30.99-35.07 44.96-50.72

$60-$79,999 29.93-34.25 44.16-51.80

$80-$99,999 36.12-41.51 36.49-48.16

Source: GAO calculations based upon 1999-2000 NPSAS data.
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 37 GAO-02-751 Student Aid and Tax Benefits

Table 5: Average Amount of HOPE Credit

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Dependent Independent

$0-19,999 264.02-364.57 567.65-666.30

$20-$39,999 876.87-971.27 782.60-877.99

$40-$59,999 982.17-1068.45 671.67-817.21

$60-$79,999 1098.65-1189.18 722.35-960.81

$80-$99,999 614.70-704.14 282.33-493.50

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 6: Average Amount of Lifetime Learning Credit

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Dependent Independent

$0-19,999 149.09-238.40 236.20-272.83

$20-$39,999 384.46-440.14 199.98-227.31

$40-$59,999 410.21-463.04 155.70-187.94

$60-$79,999 520.77-582.72 176.39-222.90

$80-$99,999 277.05-322.06 84.03-128.43

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 7: HOPE Credit as a Percent of Tuition and Fees Charged and Net Tuition and

Fees Paid by Dependent Students

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category

Credit as percent of

tuition and fees charged

Credit as percent of

net tuition and fees

$0-19,999 4.37-7.92 8.34-15.11

$20-$39,999 18.11-21.47 28.24-34.3

$40-$59,999 19.20-22.34 28.23-33.23

$60-$79,999 20.73-24.27 29.27-34.12

$80-$99,999 10.29-12.83 13.25-16.58

Source: GAO calculations based upon 1999-2000 NPSAS data.
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 38 GAO-02-751 Student Aid and Tax Benefits

Table 8: HOPE Credit as a Percent of Tuition and Fees Charged and Net Tuition and

Fees Paid by Independent Students

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category Credit as percent of

tuition and fees charged

Credit as percent of

net tuition and fees

$0-19,999 18.42-23.26 22.92-28.8

$20-$39,999 31.06-36.27 37.7-44.03

$40-$59,999 34.37-42.96 38.32-48.4

$60-$79,999 37.88-50.69 42.09-56.99

$80-$99,999 17.32-32.94 18.2-37.6

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 9: Lifetime Learning Credit as a Percent of Tuition and Fees Charged and Net

Tuition and Fees Paid by Dependent Students

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category

Credit as percent of

tuition and fees charged

Credit as percent of

 net tuition and fees

$0-19,999 3.63-5.87 6.45-10.75

$20-$39,999 8.12-8.97 12.98-14.32

$40-$59,999 8.52-9.56 12.51-13.83

$60-$79,999 8.97-10.17 11.93-13.82

$80-$99,999 4.91-5.65 6.08-7.00

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 10: Lifetime Learning Credit as a Percent of Tuition and Fees Charged and

Net Tuition and Fees Paid by Independent Students

(In percentages)

Lower and upper bounds of 95 percent confidence interval

Income category Credit as percent of

tuition and fees charged

Credit as percent of

net tuition and fees

$0-19,999 9.27-10.58 11.78-13.45

$20-$39,999 12.48-13.48 15.87-16.95

$40-$59,999 12.41-13.72 14.84-16.2

$60-$79,999 13.29-14.76 16.22-17.57

$80-$99,999 7.36-9.48 9.79-11.85

Source: GAO calculations based upon 1999-2000 NPSAS data.
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 39 GAO-02-751 Student Aid and Tax Benefits

Table 11: Amount of HOPE Credit and Title IV Grant or Loan Assistance Received

by Dependent Students Obtaining Both

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Mean title IV grants Mean title IV loans Mean HOPE credit

$0-19,999 775.92-1475.29 1214.5-2477.63 264.02-364.57

$20-$39,999 490.44-648.15 1568.21-2047.2 876.87-971.27

$40-$59,999 84.17-141-29 1541.20-1930.96 982.17-1068.45

$60-$79,999 1.08-15.01 1584.03-2060.38 1098.65-1189.18

$80-$99,999 a1156.63-1728.42 614.70-704.14

a No value calculated.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 12: Amount of HOPE Credit and Title IV Grant or Loan Assistance Received

by Independent Students Obtaining Both

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Mean title IV grants Mean title IV loans Mean HOPE credit

$0-19,999 259.08-411.96 1683.14-2301.55 567.65-666.30

$20-$39,999 214.19-314.8 1286.51-1716.85 782.60-877.99

$40-$59,999 13.72-59.27 662.30-130.19 671.67-817.21

$60-$79,999 a588.42-1330.59 722.35-960.81

$80-$99,999 a46.39-1417.17 282.33-493.50

a

No value calculated.

Source: GAO calculations based upon 1999-2000 NPSAS data.
Appendix I: Estimation of HOPE and Lifetime

Learning Tax Credits and Title IV Student Aid

Page 40 GAO-02-751 Student Aid and Tax Benefits

Table 13: Amount of Lifetime Learning Credit and Title IV Grant or Loan Assistance

Received by Dependent Students Obtaining Both

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Mean title IV grants Mean title IV loans Mean lifetime credit

$0-19,999 353.27-823.32 990.85-2231.35 149.09-238.40

$20-$39,999 370.47-490 1848.23-2312.28 384.46-440.14

$40-$59,999 49.23-85 1935.13-2369.26 410.21-463.04

$60-$79,999 0-33.41 2063.87-2561.13 520.77-582.72

$80-$99,999 a1864.27-2554.13 277.05-322.06

a No value calculated.

Source: GAO calculations based upon 1999-2000 NPSAS data.

Table 14: Amount of Lifetime Learning Credit and Title IV Grant or Loan Assistance

Received by Independent Students Obtaining Both

(In dollars)

Lower and upper bounds of 95 percent confidence interval

Income category Mean title IV grants Mean title IV loans Mean lifetime credit

$0-19,999 190.41-265.51 1646.74-2090.38 236.2-272.83

$20-$39,999 94.84-132.02 919.31-1175.66 199.98-227.31

$40-$59,999 5.65-40.83 623.96-938 155.7-187.94

$60-$79,999 a434.22-765.56 176.39-222.90

$80-$99,999 a176.17-615.13 84.03-128.43

a

No value calculated.

Source: GAO calculations based upon 1999-2000 NPSAS data.
Appendix II: Research on the Effects of

Grants, Loans, and Tax Credits

Page 41 GAO-02-751 Student Aid and Tax Benefits

To identify available information on the relative effectiveness of title IV aid

and the HOPE and Lifetime Learning tax credits, we reviewed studies of

the factors that affect college attendance and choice, completion, and

costs. These outcomes were chosen because they have been the focus of

congressional concern, as expressed in committee reports, statutorily

established study commissions, and requests for our work from Congress.

We examined studies that appeared in books, refereed journals, working

papers, dissertations, or government reports. Some of these studies were

excluded from further assessment because they did not undertake original

data analysis that could identify the effectiveness of federal financial aid

programs. Studies that provided an original empirical analysis (or, in the

case of tax credits, a simulation methodology) were subsequently assessed

according to professional standards of econometric analysis for their

methodological rigor. Some of these studies explicitly estimated the

effects of federal aid programs. Others estimated how sensitive student

attendance, completion, or choice decisions are to changes in the net cost

of college. The studies are listed in the bibliography. The results of studies

that were judged to contain acceptably identified statistical estimates

formed the basis for our findings about the availability of information

concerning the relative effectiveness of title IV grants and loans and HOPE

and Lifetime Learning tax credits.

Appendix II: Research on the Effects of

Grants, Loans, and Tax Credits
Appendix III: Comments from the Department

of Education

Page 42 GAO-02-751 Student Aid and Tax Benefits

Appendix III: Comments from the

Department of Education
Appendix III: Comments from the Department

of Education

Page 43 GAO-02-751 Student Aid and Tax Benefits
Appendix IV: Comments from the Department

of Treasury

Page 44 GAO-02-751 Student Aid and Tax Benefits

Appendix IV: Comments from the

Department of Treasury
Appendix V: GAO Contacts and Staff

Acknowledgments

Page 45 GAO-02-751 Student Aid and Tax Benefits

Jeff Appel (202) 512-9915

Thomas Weko (202) 512-8796

In addition to those named above, the following people also made

significant contributions to this report: Paul L. Posner, Managing Director,

Federal Budget Issues, Strategic Issues; Michael Brostek, Director, Tax

Issues; and Patrick di Battista, Malcolm Drewery, Bryon Gordon, John

Mingus, Edward Nannenhorn, Linda Stokes, Andrea Romich Sykes, and

James Wozny.

Appendix V: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Staff

Acknowledgments
Bibliography

Page 46 GAO-02-751 Student Aid and Tax Benefits

Cameron, Stephen V., and James J. Heckman. “Can Tuition Policy Combat

Rising Wage Inequality?” Kosters, Marvin H. (ed) Financing College

Tuition: Government Policies and Educational Priorities. Washington,

D.C.: The American Enterprise Institute, 1999.

Cameron, Stephen V., and James J. Heckman. “The Dynamics of

Educational Attainment for Black, Hispanic, and White Males.” Journal of

Political Economy, 109, no. 3, (2001): 455-499.

Cronin, Julie-Anne. “The Economic Effects and Beneficiaries of the

Administration’s Proposed Higher Education Tax Subsidies” National Tax

Journal 50 no. 3 (September 1997): 519-540.

Dynarski, Susan. “Hope for Whom? Financial Aid for the Middle Class and

Its Impact on College Attendance.” National Tax Journal 53, no.3, part 2

(September 2000): 629-661.

Dynarski, Susan. “Does Aid Matter? Measuring the Effect of Student Aid

on College Attendance and Completion.” John F. Kennedy School of

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Ellwood, David T., and Thomas J. Kane. “Who Is Getting a College

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Gravelle, Jane, and Dennis Zimmerman. “Tax Subsidies for Higher

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Heckman, James J., Lance Lochner, and Christopher Taber. “GeneralEquilibrium Treatment Effects: A Study of Tuition Policy.” The American

Economic Review, 88 no. 2 (1998): 381-386.

Kane, Thomas J. “Rising Public College Tuition and College Entry: How

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Kane, Thomas J. The Price of Admission. Washington, D.C., and New York,

N.Y.: The Brookings Institution and the Russell Sage Foundation, 1999.

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Li, Judith. “Estimating the Effect of Federal Financial Aid on Higher

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Reyes, Suzanne. “Education Opportunities and Outcomes: The Role of the

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(130052)
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