Final answer:
Interest on U.S. government bonds for educational expenses is nontaxable to promote higher education affordability, which is a key part of government efforts to encourage savings and investment in the education sector, as well as to support economic growth.
Step-by-step explanation:
The interest on certain U.S. government bonds used for educational expenses is nontaxable primarily because the government wants to encourage investment in education. Making these bonds nontaxable, serves as a form of incentive to promote higher education affordability and encourage citizens to save and invest in the education sector. This policy aligns with the broader governmental goal to stimulate economic growth through increased investment and savings, and the recognition that education has significant positive spillovers for the economy.
Government programs play a crucial role in bearing the positive spillovers of education by either directly paying for education providing loans or reducing tax payments. These programs not only allow students to gain real-world experience, but they also supply businesses with trained workers, thus strengthening the overall workforce. Moreover, U.S. government bonds, being highly secure investments with consistent repayment over two centuries, offer a safe investment vehicle for promoting savings and investment strategies within the education sector.