Professor Warren’s recent post and Dan Geldon’s follow up on student loans reminded me of a conversation I had recently about education debt. The conversation centered around why post-secondary education costs are not a tax write-off like, for example, business expenses? While there are some tax provisions designed to help curb the cost of education, such as the Hope Credit, costs associated with education are largely not defrayed, in stark contrast to the wide scope of business write-offs.

In light of the growing importance of secondary education to the service economy, it is puzzling to me that the tax code fails to create educational incentives in the same way it does for business. A tax break for educational expenses would benefit those who chose to pursue higher education. In light of all the claims about the need to educate Americans, why aren’t we doing more to make education affordable?

I wanted to run down some of the arguments I have heard about the advantages and disadvantages of making all post secondary educational expenses into a right off.

POINT:
Tax relief will disproportionately help the wealthier segments of the population because they also tend to have more access to post-secondary education.

COUNTERPOINT:
True, but its conceivable that people will be more likely to take on educational debt if they know that their expenses will be a tax write-off. Furthermore, there are ways to cap the write-off so it doesn’t apply to those with more than a certain maximum income.


POINT:
Schools will raise the price of tuition and counteract the benefit of the tax incentive.

COUNTERPOINT:
It is possible to include incentives against this, and many state systems are statutorily limited in their ability to raise tuition.


POINT:
This is a very expensive proposition; it is not revenue neutral.

COUNTERPOINT:
Aside from the fact that it would very likely reduce the number of bankruptcies in this country as education debt is growing at an alarming rate, it seems a small price to pay for creating larger educational incentives. Furthermore, as mentioned above, the educational tax breaks could be made more affordable with income caps.

POINT
There are other more comprehensive ways to reduce the cost of education.

COUNTERPOINT
True, but this seems like a good start.