Statements On Introduced Bills And Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - December 07, 2006)

Mr. KERRY. Mr. President, today I am introducing the College Opportunity Tax Credit Act of 2006. This legislation creates a new tax credit that will put the cost of higher education in reach for American families.

An October 2006 College Board report found that this year tuition and other costs at public and private universities rose faster than inflation. And, according to the report, tuition and fees at public universities rose more in the past five years than at any other time in the past 30 years, increasing by 35 percent to $5,836 this academic year. Over the same time period, tuition and fees at private universities increased 22 percent to $22,218.

Unfortunately, neither student aid funds nor family incomes are keeping pace with increasing tuition and fees. In my travels around the country, I frequently hear from parents concerned they will not be able to pay for college for their children. These parents know that earning a college education will result in greater earnings for their children and they desperately want to ensure their kids have the greatest opportunities possible.

In 1997, we implemented two new tax credits to make college affordable--the HOPE credit and the lifetime learning credit. These tax credits were important and have helped families afford college, but I believe we can do more. This week the Senate Finance Committee held a hearing on tax incentives for higher education in which we learned that the existing tax credits are not reaching enough students, particularly lower income students who are most severely impacted by rising tuitions.

The HOPE and lifetime learning credits are not refundable, and therefore a family of four must have an income over $30,000 in order to receive the maximum credit. Almost half of families with college students fail to receive the full credit because their income is too low. In order to receive the full benefit of the lifetime learning credit, a student has to spend $10,000 a year on tuition and fees. This is nearly double the average annual public four-year college tuition and four times the average annual tuition of a community college. Over 80 percent of college students attend schools with tuition and fees under $10,000.

In 2004, I proposed a refundable tax credit to help pay for the cost of 4 years of college. Currently the HOPE Credit applies only to the first 2 years of college. The College Opportunity Tax Credit Act of 2006, COTC, helps students and parents afford all 4 years of college. It also builds on the proposal I made in 2004 by incorporating some of the suggestions made by experts, including those at this week's Finance Committee hearing. My legislation creates a new credit that replaces the existing HOPE credit and lifetime learning credit and ultimately makes these benefits more generous.

The COTC has two components. The first provides a refundable tax credit for a student enrolled in a degree program at least on a half-time basis. It would provide a 100 percent tax credit for the first $1,000 of eligible expenses and a 50 percent tax credit to the next $3,000 of expenses. The maximum credit would be $2,500 each year per student. The second provides a nonrefundable tax credit for part-time students, graduate students, and other students that do not qualify for the refundable tax credit. It provides a 40 percent credit for the first $1,000 of eligible expenses and a 20 percent credit for the next $3,000 of expenses.

Both of these credits can be used for expenses associated with tuition and fees. The same income limits that apply to the HOPE credit and the lifetime learning credit apply to the COTC: the COTC will be phased out ratably for taxpayers with income between $45,000 and $55,000--$90,000 and $110,000 for married taxpayers. These amounts are indexed for inflation, as are the eligible amounts of expenses.

The College Opportunity Tax Credit Act of 2006 simplifies the existing credits that make higher education more affordable and will enable more students to be eligible for tax relief. I understand that many of my colleagues are interested in making college more affordable. I look forward to working with my colleagues to make a refundable tax credit for college education a reality next Congress. I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the bill was ordered to be printed in the RECORD

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