Reforming a variety of federal tax credits and benefits is an important step toward making post-secondary education more affordable and accessible for low- and moderate-income individuals. That is the conclusion of a recent report from The Consortium for Higher Education Tax Reform.
Members of the consortium include the Center for Law and Social Policy (CLASP), Young Invincibles, The New America Foundation and The Education Trust.
The consortium's report notes that, contrary to popular belief, tax-based student aid – not Pell Grants – is now the nation's largest form of non-loan federal student assistance. Yet, from the standpoint of assisting low- and moderate-income students attend and complete college, such tax-based aid is currently poorly targeted, overly complex, ill-timed for meeting educational expenses and limited in its impact due to lack of awareness among those who could benefit from it.
- Simplifying tax-based aid by eliminating the Tuition and Fees Deduction, the Lifetime Learning Credit and Coverdell Education Savings Accounts.
- Improving the American Opportunity Tax Credit (AOTC) by permanently extending it, making it fully refundable and indexing it for inflation after 2018.
- Refocusing the largest remaining higher education tax benefits on low- and moderate-income students.
- Coordinating AOTC benefits with Pell Grants to address rising levels of unmet financial need among low- and moderate-income students.
- Adopting a new institutional-eligibility threshold that ends tax breakssuch as tax-exempt status, charitable deduction eligibility or access to tax-exempt bond financing to institutions of higher education that fail to meet either minimum college access or completion standards.
- Creating a mechanism for families to receive the AOTC as an advance payment so that the money reaches them when college bills are due, not months later as a tax credit.
- Reinvesting any savings in students by investing in Pell Grants or other programs that promote affordability, access and success.
The consortium and its shared agenda on tax-based aid reform are an outgrowth of previous work conducted by the member organizations as part of the Reimagining Aid Design and Delivery grants program funded by the Bill and Melinda Gates Foundation. The consortium plans additional reports and recommendations on this and other higher education-related topics in the future.
– Frank Waterous