Who Receives Education Tax Benefits and the Effect These Benefits Have on the Price of College Attendance

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NCES Releases New Report

Nearly one-half (47 percent) of all 2007–08 undergraduates received an education tax benefit (Hope tax credit, lifetime learning tax credit, or the tuition and fees deduction). These benefits reduced recipients’ average college expenses for the academic year by about $700.

In addition to providing estimates on education tax benefits for all 2007–08 undergraduates, this Statistics in Brief investigates the ways in which receipt of these benefits, and these benefits’ effect on the price of college attendance, varies by family income. Since student-level data on tax benefits are not available from other sources, Internal Revenue Service rules for 2007 education tax benefits were applied to a nationally representative sample of 2007–08 undergraduate and graduate students to determine the potential distributions and amounts of the tax benefits.

Key findings include:

• At 29 percent, low income dependent undergraduates received education tax benefits at a lower rate than their low-middle, high-middle, and high income counterparts. The most common reason these low income students did not receive a tax benefit was that they had no net tuition after subtracting the grant aid and veterans benefits they received.

• Among dependent undergraduates who received education tax benefits, low income students received a smaller amount in tax benefits ($600) than did low-middle, high-middle, and high income students ($900, $1,000, and $700, respectively). Unlike other income groups, low income tax benefit recipients received more in federal grant aid and veterans benefits than they did in tax benefits.