House Overhauls Tax Breaks
WASHINGTON -- The U.S. House of Representatives on Thursday approved an overhaul of higher education tax breaks and passed legislation changing how federal student loan counseling works.
For instance, the bill makes permanent the American Opportunity Tax Credit, something that higher education advocates have pushed for since it was created as part of the 2009 economic stimulus law.
It would also change how the tax credit is calculated to more fully account for Pell Grant recipients. Currently, the value of a Pell Grant counts against a student as he or she calculates the tuition and expenses that count toward the tax break. The legislation would exempt a Pell Grant from that calculation, allowing more low-income students to benefit from the AOTC.
The Obama administration proposed such a change earlier this year in its 2015 fiscal year budget.
Community colleges, which enroll large numbers of students who use Pell Grants, had urged lawmakers to support the bill.
"The legislation achieves several important objectives for the nation’s college students, who continue to face substantial financing challenges, even at low-cost community colleges," wrote the presidents of the two main community college associations. Still, they acknowledged that the legislation "embodies certain tradeoffs."
Such tradeoffs went too far for the American Council on Education, the umbrella lobbying group for higher education, which opposed the bill.
The group said that the House proposal to consolidate tax credits and eliminate some credits and deductions would disproportionately hurt nontraditional students who take advantage of the Lifetime Learning Credit. It would also take away benefits for graduate students.
“We are in favor of reform, but the devil really is in the details,” Steven Bloom, the group’s director of federal relations, said in an interview. “If you’re going to fix these credits and deductions -- which you don’t get a chance to do very often -- you need to make sure you address the needs of students now and in the future, keeping in mind the way the demographics of student populations are changing.”
The legislation cleared the House on a 227-187 vote. House Democrats and the White House opposed the bill because they said it would add to the deficit and was not offset by increases in revenue elsewhere in the federal budget. It is not expected to gain much traction in the Democrat-controlled Senate.
Student Loan Counseling Bill
Separately, the House approved a bill aimed at bolstering the counseling provided to student loan borrowers.
The measure, the third in a series of House proposals to rewrite the Higher Education Act, would increase the amount of information that the Education Department must provide to students before and after they take out federal loans to pay for college.
Under the plan, students seeking federal loans would receive a host of new disclosures before they commit to the debt, including a recommendation that they exhaust federal loans before taking out private loans. In addition, students would see a college’s default rate compared to the national average and sector average. They would also be warned about how and when their Pell Grant eligibility expires.
Like the tax measure, the student loan counseling bill -- at least on its own -- is unlikely to move in the Senate. Senator Tom Harkin, the chair of the Senate education committee, has said that he wants to reauthorize the Higher Education Act through a comprehensive measure, not smaller individual bills.
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