Press Release

WASHINGTON, D.C. – —Today, a consortium of higher education experts called on Congress to reform tax-based student aid to ensure it reaches the low- and modest-income families who most need it to access college.  With nearly $34 billion spent each year, this form of aid is more common than even Pell Grants, but action is needed to maximize its impact on college access and completion.

The Consortium for Reform of Higher Education Tax Benefits has made a series of common sense, easy-to-implement recommendations in its new Shared Agenda and in a letter to the Senate Committee on Finance and the House Ways and Means Committee. The Consortium is calling on Congress to simplify and better target tax-based aid, deliver aid when families need it most – —not just at tax time— – and increase use and awareness of higher education tax credits. Our reforms are balanced, delivering significantly more aid to low-income families while preserving higher education tax benefits for more than 80 percent of families.

“”These tax benefits can be a maze for low-income students and families.  All they want is to access college, complete a degree, and get a good job – —but right now they’’re hitting a brick wall.  These benefits just aren’’t reaching the students who most need them,”” said Rory O’Sullivan, policy director at Young Invincibles, a member of the Consortium for Higher Education Tax Reform. “”Our reform package would simplify and realign tax-based aid toward national goals of college affordability, access and success.””

Specifically, the Consortium proposes that Congress take the following actions:

  • Simplify tax-based aid by eliminating the Tuition and Fees Deduction, the Lifetime Learning Credit, and Coverdell Education Savings Accounts;
  • Improve the American Opportunity Tax Credit (AOTC) by permanently extending it, making it fully refundable, and indexing it for inflation after 2018;
  • Refocus the largest remaining higher education tax benefits on low- and modest-income students;
  • Coordinate AOTC benefits with Pell Grants to address rising levels of unmet financial need among low- and modest-income students;
  • Adopt a new institutional eligibility threshold that ends tax breaks—such as tax-exempt status, charitable deduction eligibility, or access to tax-exempt bond financing -m—to institutions of higher education that fail to meet either minimum college access or completion standards;
  • Create 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; and
  • Reinvest any savings in students by investing in Pell Grants, or other programs that promote affordability, access, and success.

“”Our reforms would ensure that tax-based student aid would go to students from low- and modest-income households who are struggling to afford college,”” added Julie Strawn, senior fellow at CLASP. ““It’’s just the right thing to do for families, the economy, and taxpayers.””

To read the recommendations in full, click here.


The Consortium for Higher Education Tax Reform is a partnership of four organizations concerned with college affordability, access, and completion for low- and modest-income individuals: the Center for Postsecondary and Economic Success at CLASP, Young Invincibles, the New America Foundation’s Education Policy Program, and The Education Trust.