Attending school is expensive — and it’s getting even more expensive. In fact, the class of 2015 graduated with the largest amount of student debt ever.

One solution to help reduce costs are tax credits. These deductibles include the American Opportunity Tax Credit, which President Obama passed in his first term. That allows qualified students to obtain a tax credit of up to $2,500 annually, with the potential to pocket some of the money if they end up not owing taxes.

But a new study says that significant barriers limit students from taking advantage of such credits.

A New Look At Tuition Tax Benefits reveals that about 40% of undergraduate students are ineligible for tax benefits because they don’t pay tuition or file taxes. Additionally, 55% of potential refund dollars under AOTC are available to students attending for-profit schools, though they comprise only 12.9% of undergraduate enrollment.

The study is authored by Jason Delisle, director of the Federal Education Budget Project and Kim Dancy, a policy analyst with the Education Policy Program at New America.

Tax break updated

Aside from many students being ineligible, the report finds that the students most at need for AOTC benefits in particular oftentimes cannot access the credits.

“Low-income students are less likely to owe any federal taxes and more likely to receive need-based financial aid. This aid often reduces tuition to the point that students can no longer claim a credit,” the report states.

“These tax benefits for tuition and fees is a limiting feature when you consider what the other sources of student aid are doing,” Delisle told the Washington Post. “It speaks to the very sloppy, uncoordinated federal student aid policy where the left hand doesn’t know what the right hand is doing.”

Tax break 2

 

Michael Schramm is a student at the University of Michigan and USA TODAY College breaking news correspondent.