Study: Many Undergrads Remain Ineligible for Tax Breaks

November 3, 2015

Despite the expansion of higher education tax benefits in recent years, a large share of undergraduate students still are not eligible to receive them, according to a new study by the New America think tank.

The study finds that about 40 percent of undergraduate students are not eligible for any tuition tax benefit or otherwise do not file taxes. That's because financial aid covers tuition and fee expenses for many of those students, meaning that they don't have any out-of-pocket tuition expenses for which they can claim a tax benefit such as the American Opportunity Tax Credit.

The study, by Jason Delisle and Kim Dancy, used U.S. Department of Education data to analyze, among other things, how students' eligibility for tax benefits varied across different types of colleges. It examined only eligibility for tax benefits, not the rate at which students actually apply for and receive benefits

"The results also reveal that the AOTC is a boon to students attending for-profit schools and does little for students attending community colleges, which is likely the opposite effect its supporters intended," the authors wrote.

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