The high cost of the other American Dream, education

Image of Suddenly Frugal: How to Live Happier and Healthier for Less
Author: Leah Ingram
Publisher: Adams Media (2010)
Binding: Paperback, 256 pages

Tess Vigeland: We just talked about student loans and taxes. So let's merge the two with a proposal from commentator Leah Ingram.

Leah Ingram: My husband and I are finishing our 2011 tax return, the one that will determine how much financial aid our daughter gets for college next year. We already know that we'll be disappointed.

According to the price calculators on college websites, my husband and I should be able to afford about $48,000 a year for college. With two daughters two years apart, we'll have six years of college tuition payments, adding up to nearly $400,000, barring any increases.

Today's college tuition is triple what my husband and I paid in the 1980s. We've done well in our careers -- he a college administrator, me an author -- and we've been home owners since 1999.

One of the benefits of that home ownership is the mortgage-interest tax deduction. When the tax code was introduced in 1913, it included this deduction as a way to encourage home ownership, which is still considered the America Dream. But isn't getting a college education also the American Dream? That's why I'm proposing that we make college tuition 100-percent tax deductible, regardless of parental income.

The government already offers some tuition tax deductions: Up to $4,000 annually, no matter how many kids you have in college, and $2,500 per student for college expenses. The catch? There are income limits to each of these tax deductions, neither of which my husband and I qualify for.

This all leaves my husband and me stuck between a financial rock and a tuition hard place: We worry we earn too much for financial aid, we've never earned enough to fully fund our daughters' college savings plans and we don't earn enough to pay the $48,000 a year for private college tuition, despite what the calculators say. Even state schools where we live in Pennsylvania are no bargain.

So imagine this: What if during the six years our two daughters will be in college, we could deduct our tuition payments on our taxes? We could give our daughters the greatest gift of all -- a debt-free college education.

Vigeland: Leah Ingram is the author of 14 books, including "Suddenly Frugal: How to Live Happier and Healthier for Less." What do you think of her proposal? Tweet it to me @radiotess or post on our Facebook page.

About the author

Leah Ingram is a freelance writer, lifestyle and frugal-living expert based outside Philadelphia, and the author of “Suddenly Frugal: How to Live Happier and Healthier for Less."
Image of Suddenly Frugal: How to Live Happier and Healthier for Less
Author: Leah Ingram
Publisher: Adams Media (2010)
Binding: Paperback, 256 pages
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Perhaps extending the GI Bill benefits to other public service opportunities would be a more acceptable approach than using the tax code. Taxes should fund the government, fairly. Policy on how to spend it should be a separate matter.

The home mortgage deduction is a bad idea and the college interest deduction is even worse. House buyers are already rewarded with the equity they build up in their house. Subsidizing the interest paid on their loans induces house buyers into paying more for a house than they can really afford. Except for keeping the realty lobby happy we have never needed this piece of middle class welfare to get people to buy houses.

Ms. Ingram and her husband already receive a subsidy just for having kids in the form of dependent exemptions. She receives "free" education for her kids if she sends them to public schools. If she wants to send them to college we allow her to save for their education tax free. Now she wants tax payers to further subsidize her by allowing her to deduct the tuition possibly paid for with tax exempt savings.

Want to send your kids to college. Start saving when you're pregnant then suck it up and pay out of pocket, apply for scholarships, borrow or work. Oh, you might also consider getting an antenna and dropping cable.

The reward for a college education is that extra million dollars Marketplace Money is always telling us you will earn more than your high school educated peers. Why should they pay higher taxes to help you become their future rulers?

Agreed. If you have no children, and don't own a home, you have to manage without the basic preferential deductions. And the home mortgage deduction is discredited by economists, though supported by strong lobbies.

I really don't understand why parents should be rewarded for paying for their children's education. The current tax code promoting home ownership does not give your parents a tax deduction for buying you a house. That makes no sense, just as Ms. Ingram's proposal makes no sense. Home ownership is made more affordable by making mortgage interest tax deductible. That makes much more sense to me. Student loan interest should be made tax deductible the same way mortgage interest is. Currently you can't deduct any student loan interest if your individual income is $70,000 or more ($140,000 or more if you file a joint return). As someone in the top 2%, I can tell you you had better be making more than that if you will ever be able to pay back your student loan completely. Student loan debts are now routinely in the $100K + range and can take up a good chunk of young people's income that they could be using to buy goods and services to grow our economy. Making student loan interest tax deductible for everyone will grow our economy today and reward people for getting a college education instead of rewarding them for having wealthy parents.

The dad is a college administrator. Does he not have the benefit of tuition remission?

No I do not want to pay more taxes for your children to go to college.

Ms. Ingram, Your proposal for a new government handout (a new subsidy for higher education) would only result in further skyrocketing tuition. Look at housing prices the two decades after Congress passed the mortgage interest deduction as an example of such a subsidy at work. If what you crave is more affordable tuition for the average family, you need to design a system that makes it difficult for universities to raise tuition every year. In other words, providing more money to students / parents is not the answer. As an alternative, subsidized loans should *not* be made available for universities that are not affordable. For example, make students ineligible for student loans if the university they are attending is above some affordable tuition threshold. With such a reform, the free flow of money to univerisities (I believe the root cause of the rise in tuition over the past 3 decades) will begin to be reined in. The board that rubber stamps tuition increases every year will think twice because if they get too agressive they will make their students ineligible for the money that the university needs.


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