Financial Aid and Taxes – How much is too much?

So, I’m not really going to answer that question in the title. At this exact moment, I’m not even sure there’s a right or wrong answer. This is a weird and offbeat topic for me and I will be discussing numbers, my own personal numbers, though I’m rounding them a bit for ease of reading and whatever little privacy that might afford me.

With an election coming up, me taking classes paid for by financial aid, and one of those classes dealing heavily with government and policy, I have come to a very strange realization. I am, by the book, a net negative for federal tax money. A “leech” if you will, though I feel that term is generally used in a more derogatory manner than I intend here.

Let’s start at the beginning. My yearly income typically weighs around 45K USD give or take 5. My last tax filing was 43K, and the next one is on track to fall closer to 47ish, I think.

I used to intentionally overpay with no exemptions. A hold-over from when I was younger and ended up owing, which is difficult to deal with when you’re not planning for it. I don’t do that now though and with whatever I put in place I end up paying a rather pitiful $700 in taxes. Like, for the whole year, which the federal government gives back every year. This has a lot to do with the fact that my income is the total income for a family of five.

For all practical purposes, I do not pay a federal income tax. On top of that, we receive an earned income credit that’s typically in the 4-6K range but has at times been as high as 9K. I want you to stop for a second, and if you know how much you actually paid, figure up how many of you it takes to pay for one of me and let me know how that makes you feel. I actually find it mildly disturbing myself, and I question the wisdom of the system as it is.

Oh, but it gets worse now. This train of thought started when I wondered to myself if receiving the Pell grant would affect my taxes or not. The answer is no, by the way. Again, due to my familial “situation,” I qualify for a rather sizable amount of money. Enough to cover tuition, fees, and books so far. The things I’ve paid personally are incidental and indirect costs like the application fee, some proctor fees, cost of gas there and back, and the time off to actually get some things done on campus when needed. Now, this is a local state college, and we’re only talking around 6K/year, but that’s in addition to the tax refund.

So let’s recap. I pay absolutely nothing in taxes and receive roughly 12K/year, about a quarter of my gross income. Not gonna lie, that hardly seems fair, and definitely raises the question of where that money does come from if it’s not coming from people like myself. I realize there’s a sort of “investment in the future” sort of logic, especially in the Pell grant, but still. The idea of being a net drain on national resources bothers me and makes me wonder if this setup is practical, helpful, or sustainable as a nation. This is especially true in the face of healthcare legislation and just how absurd the cost of it would be.

I don’t know. I’m concerned, and I’ve been thinking about this for around a month and haven’t really gone anywhere with it.

Y’all take care, let me know what you think.

One thought on “Financial Aid and Taxes – How much is too much?

  1. So. What you need to do is look at it as the Fed is investing in your future. They are in part gambling on a future you. There will be a point in you future when as a result of having a college degree where you should be making more money. Also, there will be a point where your kids are no longer a deduction. If you ran your numbers at say a $65,000 income, with an additional $37,000 from a spouse, with no children. Now you have jumped to a higher tax bracket, you’ve lost deductions, and the IRS can recoup a lot of what you have gotten.

    It’s not a situation that many can benefit from. Not many will fall into the specific situation you’re in. Some may earn too much, or be single. Take it as a welcome relief that you will be able to pursue your education and not have to go bankrupt to do so.

    My wife just graduated. Due to some crazy circumstances her employer covered her tuition for a few years. There was a maximum, but she managed to have 8 classes covered each year. Strayer has a program where for every 3 paid you got 1 free. When we reached last year, and she had 5 classes to go, and had built up credit for those, her employer cut back on the program because too many were taking advantage and it was costing them too much. So times things just work out for you.

    Liked by 2 people

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