NAICU Washington Update

Senate Finance Looks at Student Debt and Tax Benefits

June 27, 2014

Preparing students for the cost of college and attempting to reduce loan debt via savings mechanisms in the tax code was the focus of a Senate Finance Committee hearing held June 24.

The hearing, “Less Debt from the Start: What Role Should the Tax System Play?”, was the first for Senate Committee Chairman Ron Wyden (D-OR) as he begins exploring tax reform policy.

During the hearing, committee members examined existing tax-favored savings options as well as considered additional new ideas, including the concept of “advanced” tax credits to help pay for college. The committee also discussed options for making colleges more accountable for the “federal revenue brought in by students.”

No higher education representatives testified at the hearing. Witnesses included tax policy experts, a high school counseling director, a recent high school graduate, and a former committee staffer who spent years examining the college and university sector for Senator Charles Grassley (R-IA).

The idea of “advanced” tax benefits was suggested, but was not seen as a viable option given the timing of paying tuition, versus tax filing and refund season.

Both the student and school counselor discussed ways to better inform high school students of the various options for saving for college including the tax benefits.

It was also suggested that billions of dollars are being provided to colleges and universities through various provisions of the tax code without application of any real requirements, standards or incentives to control the cost of tuition. One witness urged the committee to review how endowments, tax exempt bonds, tuition remission and other programs are treated in the tax code to better understand how taxpayer education dollars are spent on institutions and students.

This is the first of three hearings Chairman Wyden plans on convening over the summer to examine various sections of the tax code. At this time, he does not plan on moving forward on any particular tax reform legislation.

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