Students who qualify for free or reduced-price college tuition are paying more in federal taxes than they would have under the current system, a new report found.
The nonpartisan Tax Policy Center estimated that the average family earning less than $50,000 a year would pay $1,957 in federal income taxes and $1.1 million in state and local income taxes in 2026 under current tax law.
But that’s far less than the $1 million they would pay under the existing system.
If the average federal student were to make a total of $60,000, they would save $8,000 in federal and state taxes.
This could help lower the cost of attending college by reducing student debt.
Students who qualify under the government’s subsidized Stafford loans could also save money by paying more toward their bills.
The Tax Policy center estimates that the federal government pays nearly $4,700 in interest on $25,000 of debt.
That’s an average of $4.70 a day.
The report says students who qualify would also pay less in taxes, owing about $1 per $1 of income in 2027.
In 2019, those student debt payments totaled $1 trillion.
The Congressional Budget Office estimated the government would spend $2.5 trillion over the next decade on interest payments on student debt, with a projected increase in student loan debt of $7.6 trillion by 2027 due to higher income.
Under current law, the government pays federal student loans interest on a fixed rate of 4.4 percent.
It charges borrowers a fee of 0.5 percent for each payment.
The federal government says borrowers pay about $2,000 per month for the interest on their loans.