College Access and Tax Credits
Author: Cooper, Michelle Asha
Date: 2005-10-15
Type: Reports - Evaluative
Subjects: Tax Credits,Access to Education,Higher Education,Federal Legislation,Educational Legislation,Student Financial Aid,Enrollment,Economically Disadvantaged,Eligibility,College Students

For over a half-century, discussions of educational barriers have figured prominently on the national agenda. In the 1940's, under the leadership of President Harry Truman, the Commission on Higher Education articulated the nation's commitment to &quot;eliminate the barriers of equality of educational opportunity.&quot; Nearly two decades later, the Higher Education Act of 1965 (HEA) was enacted. The primary goal of the financial aid programs authorized under the HEA is to ensure that no academically qualified student who desires an education is denied access because of the lack of financial resources. Although the financial aid programs authorized under the HEA have helped to make college affordable for many low- and moderate-income students, many more of these students continue to encounter financial barriers that have adverse effects on their college enrollment and persistence. In the 1990s, financial barriers to college attainment became an even greater challenge as tuition prices soared, making the cost of attendance prohibitive to many low- and moderate-income students and families. In response to these concerns, President William J. Clinton enacted the Taxpayer Relief Act of 1997. This legislation, which included the HOPE and Lifetime Learning tax credits, marked a new era of federal support for equalizing educational opportunity. This report outlines the goals and key provisions of the Taxpayer Relief Act of 1997, focusing specifically on the HOPE and Lifetime Learning tax credits. In addition, the report summarizes the existing studies on tax credits and college enrollment, which typically show that the policy's structure prevents it from achieving its intended outcomes--making college accessible and affordable. The HOPE and Lifetime Learning tax credits were intended to increase college enrollment rates. Although some researchers speculate that it may be too soon to assess the effects of the HOPE and Lifetime Learning tax credits on college enrollment, some still attempt to gauge the policy's effectiveness. These researchers conclude that: (1) The HOPE and Lifetime Learning tax credits have not increased college enrollment rates; and (2) Unlike the traditional student aid programs, the primary beneficiaries of the HOPE and Lifetime Learning tax credits are middle-income students. These credits encourage middle-income students and adult learners to consider a wider array of college-choice options (i.e., to enroll in four-year colleges rather than two-year schools) and to continue post-baccalaureate studies. But the credits do not appear to have any significant effect on the enrollment decisions of low- and moderate-income students. The paper concludes with additional comments on the enrollment effects of tax credits and offers suggestions for additional research. Appendix includes: Selected Characteristics of Tax Provisions in the Taxpayer Relief Act of 1997. (Contains 4 tables and 3 figures.)