Financial aid, tax credits perform essential role in student finances

by Andrew Pritchard

A recent General Accounting Office report on education tax credits does not signal a crisis in financial aid for low-income students, Kristine Wright, interim student finance director, said on Tuesday.

“This is a snapshot and a point in time, and it’s tough to draw too many conclusions from it,” she said.

Looking at what proportions of low-income students’ costs were paid by particular financial aid sources over time would give a more accurate impression, Wright said.

The report released last week by Congress’ investigative arm found approximately one-third of dependent undergraduates from families with incomes of more than $40,000 used the HOPE education tax credit, and approximately one-third used the Lifetime Learning credit.

A smaller proportion of students with lower family incomes used the credits, and students whose family incomes were below $20,000 annually seldom used them, according to the report.

“The bottom line is that the HOPE and Lifelong Learning credits help middle-income students, so it does exactly what it was designed to do,” Terry Hartle, senior vice president for government and public affairs at the American Council on Education, told the Chronicle of Higher Education.

However, Wright said financial aid can come from grants and loans as well as tax credits.

“They’re going to be taken advantage of in different ways,” she said.

Nearly three-quarters of undergraduates in the 1999-2000 academic year received some form of financial aid from the federal government, according to the GAO report.

“The grants go to the neediest people from the poorest families,” Wright said, while tax credits typically run the other way because higher-income families are more able to take full advantage of the credits.

“That’s the only aid they get in many cases, outside loans,” she said.

At the Capitol

wright said the University is actively pursuing federal, state and private funding options to ease students’ debt burden, but she said the state’s tight budget might mean little additional money from lawmakers hearing the University’s budget request next session.

“We can ask all we want to,” she said, “but some of it comes down to what the Legislature has determined is available for higher education, of which we are a piece.”

Some congressional candidates reacted to the report with concern about the costs of higher education.

“I would like to see credits like that be taken advantage of by lower-income individuals,” Republican Daniel Mathias said. He is running for the 5th District seat currently held by Democrat Martin Sabo.

Mathias said he also favored expanding programs such as Pell grants to ease students’ long-term debt.

Clyde Billington, the Republican challenging Democratic U.S. Rep. Betty McCollum in the 4th District, said he also wants to see more Pell grant funding and would like to eliminate the rule that taxpayers above a certain income cannot deduct their student loans.

He said he was concerned about rising tuition.

“You can’t keep continuing that,” he said. “You’ll drive out the lower-income students.”

Billington, a college professor, said some of his students joke about not being able to date anyone because the two of them would have too much debt if they got married.

Wright said the current generation of students would have to get serious about financial aid funding if they want state legislators to pay attention to the issue.

“I think people need to pay attention to who they’re voting for and what their record is on supporting financial aid for students, as well as their record on direct support for school,” she said. “Ö Part of this reflects who legislators know will vote.”