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President Biden and House Way & Means Committee Democrats have proposed increasing the earned income tax credit (EITC) for workers without children at home – so called “childless” workers. They’d roughly triple the maximum credit to $1,500 and increase the income range over which people could get the credit. Those two changes would provide substantial benefits to workers. But they leave out low-income, independent, postsecondary students. That’s too bad. They need help.
The Democrats’ plans also would make more people eligible for the credit. Under current law, parents of any age can be eligible for the EITC. But workers without children at home must be between the ages of 25 and 64. The proposals would eliminate that upper age limit for childless workers. It would also drop the age of eligibility down to 18 for former foster children and youths who are homeless, and it would drop the age of eligibility to 19 for most others.
But students who are working and attending school at least half-time would not become eligible for the credit until they turned 24.
The case for students
Students are excluded based on the mistaken notion that they can get their needs met through financial aid and parental support. But the financial aid system routinely understates true needs and overstates students’ ability to pay. And over one-third of students come from households with incomes below the poverty level, suggesting their family financial support is limited.
To make ends meet, more than half of students work. That number might drop if college costs drop significantly. But even so, there will likely be students from low-income families who will continue to need to work. The EITC could help boost their incomes.
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Policymakers may worry that students who are supported by their families will say they are independent so they can claim the EITC. An EITC of up to $1,500 could exceed the value of the $500 dependent tax credit their parents might otherwise claim for them.
But that logic fails to recognize that many students must work to finance their education. Financial instability is the main reason most students leave college early. While policymakers should make sure students don’t game the system, their top priority ought to be to help low-income independent students who are struggling.
In a recent analysis, my colleagues and I found that extending EITC benefits to low-income, independent students would be one way to shore up their finances and help them stay in school.
Expanding the EITC could be a substantial boost to childless workers who struggle. It also could help students who work make ends meet.