Getting Married? It’ll Cost You in College Financial Aid

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What is the cost of getting married? When it comes to sending your children to school, it can be in the tens of thousands of dollars. As high school seniors face tomorrow’s deadline to decide on college acceptance offers, the marriage question is likely weighing on many people’s minds.

The Economics21 editors have written extensively about the tax and transfer payment effects of getting married. Higher earnings reduce transfer payments and increase taxes, discouraging marriage. Subsidies under the Affordable Care Act phase out at 400 percent of the poverty line, also providing a disincentive to tying the knot. The higher education financial aid effects can be just as devastating and serve as another matrimonial deterrent. Consider Monica (not her real name), the African American mother of two daughters. An immigrant from Cote d’Ivoire, she is an American success story, gaining her citizenship and raising two daughters on her own. One is a college junior, the other a high school senior trying to decide between colleges.

Before getting married in July, Monica’s income made her eligible for financial aid which brought her yearly tuition liability to $15,000. If she had not got married, her per-student tuition liability would have likely remained the same, so she would have been responsible for $30,000 a year for both of her daughters combined. Instead, her daughter’s university wants her to contribute $25,000 for each child because of her new husband’s income.

This increase happened even though Monica’s new husband is not the biological or legal father of her daughters, and he has children of his own to support. Cohabitation without marriage pays. If her daughters were to attend the same school, Monica would have to pay an extra $50,000 in college tuition over the course of her daughters’ educations–just because she got married.

Federal financial aid policies create disincentives to marriage. Federal higher education student aid is determined by filling out the FAFSA which relies on IRS tax return data. Aid is reduced based on the Expected Family Contribution, which is determined by income, assets, and benefits received. When people marry, they lose out on a substantial amount of student aid, even if their new spouse is not the biological or legal parent.

As President Obama continues to push the flawed statistic that women earn 77 cents for every dollar a man makes, it is important to see the real War on Women. Financial disincentives to marriage–from Obamacare to tax rates to financial aid–affect men as well, but they are felt the strongest by women who are still more likely to move out of the labor force to look after their children and return to work when their children are in school or have left home.

When second earners enter the workforce, their tax rates begin at their spouses’ income levels. It should come as no surprise that when the reward for working decreases, from loss of benefits and increased taxation burdens, people work less. This can happen in two ways. If a spouse’s added income disqualifies the household from receiving government benefits such as food stamps, healthcare subsidies, or the EITC, there is a marriage penalty. Also, a spouse’s added income can result in a higher combined tax rate than if both people remained single and filed separately.

Either way, creating these disincentives to work is no way to encourage cohesive families. Another reason the marriage penalty is harmful is that marriage is a reliable path to the middle and upper-middle class. According to Census Bureau data, 46 percent of females living alone are in the bottom fifth of household income. For families with no male spouse present, this number is 30 percent. Only seven percent of married couples are in the bottom fifth of income earners. Alternatively, 78 percent of the top fifth of households by income are married families. Only five percent of the top fifth are females living alone.

With Thomas Piketty’s new book, Capital in the 21st Century, reinvigorating the discussion over economic inequality, where is the outrage over the marriage penalty’s negative effects on economic mobility? The U.S. tax code, the basis for determining college financial aid, needs to adapt to realize the economic benefit of two-earner households. This could be done by allowing a deduction for second earners (similar to what existed from 1981 to 1986). At the very least, the FAFSA needs to update how it determines contributions from step-parents. With the current political climate, private colleges should not wait for Congress to act–they should see the marriage penalty as an issue of fairness and adjust their financial aid calculators accordingly.

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