The tuition-tax-free-transfer rule favors families wealthy enough to pay tuition directly

Evidence

Back when very few Americans, and almost exclusively the wealthy, attended college, their families received significant tax breaks that continue today. If the bank of Mom and Dad (or Grandma and Grandpa) is paying for you to attend college, that money is treated as a tax-free gift to you for federal income tax purposes, provided it’s sent directly to the educational institution. Let’s pretend that I attend Emory and have a grandparent who can afford to cover the 55,998 for tuition and fees Emory charged for the 2020–21 academic year. (My paternal grandmother, Bertha, was a domestic worker, and my maternal great-grandfather was born enslaved in South Carolina in 1862, so this isn't a particularly likely scenario, but stay with me.) If Grandma Bertha were to give me the money as a gift, it would be tax-free for her only to the extent of 15,000; she would need to account (for gift tax purposes) for the other 40,998. But if she could write a 55,998 tuition check directly to Emory University, the entire amount would be tax-free and there would be no need to further account for it. (Under current law, this is largely an academic distinction. Even if Grandma Bertha did give the money directly to me, requiring her to account for it on her taxes, it’s unlikely she’d actually reach the threshold required for gifts to be taxed. Tax-free family transfers will be discussed in more detail in chapter 5.) — Dorothy A. Brown, The Whiteness of Wealth, 317

Categorization

• QUESTION: The author herself flags the gift-tax exclusion as ‘largely an academic distinction’ — need the real mechanism by which wealthy families benefit, deferred to chapter 5.
• XREF: This is a candidate for one of the four named tax provisions with a precise mechanism the reader wants to articulate.