Emanuel Highlights Universal Higher Education and Lifetime Learning Act of 2007

Press Release

Dr. Wayne Watson, Chancellor of the City Colleges of Chicago Testified before Committee

Today, at a Ways & Means subcommittee hearing on higher education tax incentives, U.S. Representative Rahm Emanuel (IL) spoke about the importance of simplifying the tax code to make a college education more affordable and accessible. Emanuel highlighted his Universal Higher Education and Lifetime Learning Act of 2007, a bipartisan bill that consolidates the three main education tax benefits into one easy-to-use higher education tax credit.

"You earn what you learn," said Emanuel. "Post-secondary education has become the key to obtaining a high-skill, high-wage job."

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. College costs have grown nearly 40 percent in the last five years. The average cost for a year at a community college is over $13,000. The average cost for a year at a public four-year school is over $17,000. And the average cost for a year at a private four-year school is over $32,000.

"The only thing increasing as fast as the importance of a college degree is the cost of getting that degree," said Emanuel. "Is it any surprise that two-thirds of students at four-year colleges and universities are graduating with student loan debt?"

Over the past decade, the amount of student loan debt that the typical college student owed has doubled, going from $9,250 to over $19,000. Estimates show that 4.4 million academically qualified students will opt not to enroll in a four-year university because the cost of a college education is beyond their reach.

"The typical college grad gets a diploma in one hand and a $19,000 bill in the other," said Emanuel.

Under the current tax code, there are 12 different higher education tax benefits, the IRS Publication that explains these benefits is 80 pages long, and of the six different education tax benefits that include phase-out provisions based on income, there are five different income threshold amounts. Among the nine provisions that provide a benefit to reduce education "expenses," there are six different definitions of expenses. Books and supplies are allowable expenses for three education benefits, but not for the other six.

"If we want people to go to college, they shouldn't have to stop first at H+R Block," said Emanuel.

According to today's GAO testimony, 412,000 tax filers, who were eligible for the education tax benefits, did not claim them. In addition, there were an additional 189,000 taxpayers who claimed one of the education benefits but claimed the wrong one. In total, GAO estimates that 28% of eligible tax filers, or more than 600,000 people, did not take full advantage of these education tax benefits.

"Millions of dollars in education assistance is being left on the table," said Emanuel.

To simplify the tax code and make higher education more affordable and accessible, U.S. Representatives Rahm Emanuel and Dave Camp (MI) introduced the Universal Higher Education and Lifetime Learning Act of 2007. This bill will consolidate the three main education tax benefits into one easy-to-use higher education tax 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, 28% of all eligible tax filers did not claim the credit or claimed the wrong one, costing them hundreds of dollars in tax savings.
- 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, increasing 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 bill provides a 50% refundable credit that will allow these households, for the first time, to receive a tax benefit for higher education.
- 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 bill expands the type of eligible education expenses that qualify for the tax credit to include room and board, books and supplies, and transportation. With this change, the 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.

The Universal Higher Education and Lifetime Learning Act of 2007 has bipartisan and bicameral support. There are currently 19 cosponsors, including 12 Democrats and 7 Republicans. There are 10 cosponsors that serve on the Ways and Means Committee. Senator Bayh (D-IN) has introduced the Senate version of this legislation. Additionally, the bill is supported by a wide coalition of education, business, and consumer groups, including: American Association of Community Colleges, American Association of Universities, National Association of State Universities and Land-Grant Colleges, National Association of Independent Colleges and Universities, American Association of State Colleges and Universities, American Council on Education, American Association of Jesuit Colleges and Universities, U.S. Chamber of Commerce, Financial Services Roundtable, Business Roundtable, The Workforce Alliance, and United States Public Interest Research Group.

Emanuel's fellow Chicagoan Dr. Wayne Watson, Chancellor of the City Colleges of Chicago, appeared before the committee to testify on the ways that we can make higher education more affordable and accessible for all students who are seeking higher education.

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