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Tax Reforms for Taxing College Costs

Tax Reforms for Taxing College Costs

Inside Higher Ed

Alexis Gravely

June 30, 2021

A panel of witnesses testified before members of the House Ways and Means Committee Tuesday about expanding access to higher education, primarily focusing on how existing policies — like the Pell Grant and higher education tax credits — could be reformed to better serve the students most in need.

The current higher education system is not equipped to support low-income students, students of color and students with disabilities, said Marshall Anthony Jr., a senior policy analyst at the progressive think tank the Center for American Progress. The Pell Grant doesn’t cover a high enough share of the cost of college, students would have to work more than 15 hours a week in most states in order to afford to attend a four-year public institution — and studies suggest working more than that can hinder students’ completion — and the lack of funding for community colleges means they often don’t have the resources to serve the lower-income students who attend.

“The ability to graduate should not be conditional upon a student having good fortune,” Anthony said. “But we’ve created and perpetuated a system where that unfortunate reality has been the standard for far too long.”

The intent of the virtual subcommittee hearing was to examine how the powerful, tax-writing Ways and Means Committee could do more to help students, said Representative Bill Pascrell Jr., a Democrat from New Jersey, in his opening statement.

“Are there ways to use the tax code to enable students, especially low-income ones, to receive higher education?” Pascrell asked. “That’s the question.”

And several of the witnesses offered answers. Susan Dynarski, a professor of public policy, education and economics at the University of Michigan, said that current higher education tax incentives aren’t reaching the right students.

“The education tax benefits provide relief for upper-income families who have gone to college,” Dynarski said. “But they provide comparatively little relief for low-income families.”

For example, only students who pay over $10,000 a year in tuition and fees can receive the full Lifetime Learning Credit — which can help pay for undergraduate, graduate or professional degree courses and can be claimed for an unlimited number of years. But community colleges, which enroll the majority of undergraduates as well as disadvantaged populations, don’t have tuition costs high enough for students to claim it.

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