A Shared Agenda for Reform

If asked, what would you say is the largest form of federal student aid, excluding loans? If you guessed Pell Grants, you’d be wrong. It’s student aid delivered through the tax system. Since its inception in the late nineties, tax-based student aid has more than quadrupled and now represents half of all non-loan federal aid. In 2012, the federal government spent nearly $34 billion on tax-based student aid—a billion more than it spent on Pell Grants. Despite this rapid growth, policymakers haven’t scrutinized this aid to determine whether it improves college affordability, access, and success.

Given rising college costs and tight federal budgets, Congress should take action to maximize the impact of federal higher education spending. That means ensuring tax-based student aid goes to low- and modest-income students striving to reach the middle class rather than higher-income individuals who are already very likely to attend college. Reforms should also make it easier for families to understand and claim tax-based student aid and ensure aid is delivered when college bills are due. Further, institutions of higher education that do not meet minimum thresholds for advancing college access and completion goals should not receive federal tax subsidies. Finally, we should reinvest any potential savings from reform into students. Every dollar should be used to improve college access, affordability, and success, including through funding for the Pell Grant program.

On June 24 the Consortium for Higher Education Tax Reform will release a White Paper and hold a panel event that address how federal higher education tax benefits can work better for students and families. Consortium partners include the Center for Postsecondary and Economic Success at CLASP, the Education Trust, New America’s Education Policy Program, and Young Invincibles. The Consortium has spent the last year identifying strengths and weaknesses in federal higher education tax policy and providing recommendations for redesign and reform through the release of Higher Education Tax Reform: A Shared Agenda for Increasing College Affordability, Access, and Success.  Four additional issue briefs written by each of the consortium’s members address in greater depth four specific aspect of policy recommendations in the Shared Agenda:

• Building an AOTC Movement: Strengthening Outreach for a Reformed American Opportunity Tax Credit
  Steve Burd & Rachel Fishman, New America
   
• Help When It’s Needed: Advancing the AOTC
  Steve Holt, CLASP
   
• Tough Love: Getting All of Our Colleges Over Bottom Line Quality Standards
  Michael Dannenberg & Mary Nguyen Barry, The Education Trust
   
• Tax-Exempt Borrowing at Postsecondary Institutions: How Reforming Tax-Exempt Bonds Can Improve Student Outcomes and Save the Government Money
  Rory O’Sullivan & Portia Boone, Young Invincibles

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 Consortium is funded by the Bill & Melinda Gates Foundation as part of its Reimagining Aid Design and Delivery initiative. 

Join the conversation online using #sharedreform and following @NewAmericaEd. 

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