Senator Bayh, Congressman Emanuel Introduce Bipartisan Tax Bill to Make Higher education Universal

Press Release

Senator Bayh, Congressman Emanuel Introduce Bipartisan Tax Bill to Make Higher education Universal

Today, U.S. Senator Evan Bayh, U.S. Representative Rahm Emanuel (D-IL), and U.S. Representative Dave Camp (R-MI) introduced the Universal Higher Education and Lifetime Learning Act, which will strengthen and simplify the three existing tax breaks students currently use to help pay for higher education: the Hope Scholarship, the Lifetime Learning Credit, and the deduction for tuition and fees.

The bill will benefit 9 million students attending four-year public and private colleges and universities and an estimated 1.1 million students attending community colleges. The introduction of the bill comes just one day after Indiana University trustees voted to raise tuition and fees for students attending classes at the Bloomington campus.

"Middle class families struggling to afford college tuition deserve a break—a tax break," Senator Bayh said. "The American Dream is founded on the idea that anyone who is willing to work hard and sacrifice will be able to create a better life for themselves and their children. However, the rising cost of higher education is putting that dream out of reach for too many of our young people. This legislation is a lifeline to families who need a little help to send their kids to college."

"Skyrocketing costs are putting college out of reach for millions of middle-class students and saddling millions more with thousands of dollars of debt that will take years to pay off. In order to ensure that we remain globally competitive, we need to take steps to guarantee the best-educated workforce in the world," said Emanuel. "This bill makes college more affordable and accessible for the middle class and provides a significant investment in ensuring that our workforce remains the envy of the world."

Studies show that 80% of the new jobs over the next decade will require some level of higher education and that a college graduate can expect to make 75% more than a high school graduate. At the same time skyrocketing costs are putting higher education out of reach for middle-class students. The average total costs for a year at a community college is over $12,000, while the average cost for a year at a four-year state school is now over $16,000. Estimates show that 4.4 million academically qualified students will opt out of going to a four year college, and another 2 million will forgo college entirely. In addition, the typical college student is now finishing school with over $19,000 in student loan debt.

In addition to addressing the soaring cost of higher education, the bill dramatically simplifies the tax code so students and families can use the new tax credit without having to wade through complex I.R.S. forms, instructions, and pamphlets.

"The three varying tuition tax breaks currently on the books are good, but students aren't tax experts and they shouldn't have to be in order to determine which one is the right one for them. These students are doing enough reading during the school year and we shouldn't make them delve into nearly 100 pages of IRS documentation just to get a little tuition assistance," said Camp. "Our bill combines and simplifies the existing credits. By eliminating the complexity and duplication, more students will get the financial help Congress intended. This is a common sense proposal that will help more young adults get the college degree they will need to excel in life."

Under current law, families and students must wade through an 83-page IRS document to determine whether they qualify for an education tax benefit and then determine which one provides the maximum benefit. The Government Accounting Office estimated that 27% of eligible taxpayers do not take advantage of these tax benefits in part due to the complexity of the current system.

The federal government has created three separate higher education tax incentives with provisions that are confusing and difficult to apply. The Universal Higher Education and Lifetime Learning Act of 2007 simplifies the tax code so students and families can easily understand and access the credit.

Specifically, the bill will:

•Simplify and Consolidate Three Higher Education Tax Incentives. Emanuel's bill consolidates the Hope Credit, Lifetime Learning Credit, the tuition tax deduction into one simple, streamlined, easy-to-understand credit, which combines the best features of the existing tax benefits. According to a GAO study, 27% of all eligible tax filers did not claim either the tuition deduction or a tax credit.

•Make College More Affordable for the Middle Class. The bill provides a maximum $3000 credit that is available on a per student basis. The bill expands eligibility for the credit to higher income levels and increases the benefit for middle-class families struggling to keep up with rising tuition costs.

•Makes College More Accessible for the Middle Class. One-third of all American households, which are home to about half of all American children, do not have federal income tax liability. The Emanuel bill provides a 50% refundable credit that will allow these households, for the first time, to receive a tax benefit for higher education. Currently, among the 67 million taxpayers that earn less than $30,000, the higher education tax benefits are only providing $1.5 billion in assistance.

•Creates Universal Credit for All Post-Secondary Education. The credit is available for all four years of college (public or private), two years of community college, two years of graduate school, and is available to individuals that are updating their skills in a training or certificate program.

•Covers Non-Tuition Costs. The Emanuel bill expands the type of eligible education expenses that qualify for the tax credit to include room and board, books and supplies, and transportation. By modifying the definition, the Emanuel bill conforms how eligible education expenses are defined in the tax code with how they are defined for the purpose of qualifying for federal financial aid.

George R. Boggs, President of the American Association of Community Colleges, which represents the nation's 1,200 community colleges, said that, "Community colleges strongly support this legislation, which will greatly enhance access to community college. The bill also increases equity in the tax code's college financing vehicles and dramatically reduces their unnecessary complexity."

A broad spectrum of education and business organizations have endorsed this legislation, including: the American Association of Community Colleges, the American Association of Universities, the National Association of State Universities and Land-Grant Colleges, the National Association of Independent Colleges and Universities, the American Association of State Colleges and Universities, the American Council on Education, the U.S. Chamber of Commerce, the Financial Services Roundtable, the United States Public Interest Research Group, and the Business Roundtable.

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