A bill heading to the Senate would consolidate tax credits for families and students paying for college (Efile/Flickr CC).
In Washington D.C. this week, House lawmakers advanced a bill that could make it easier for students and families to manage debt by combining four college tax benefits into a single one. The idea, supporters say, is to reduce some of the confusion that exists around paying for college. Despite current tax credits, student loan debt in the United States has skyrocketed over $1 trillion.
If signed into law, the Student and Family Tax Simplification Act would streamline current student tax incentives into one consolidated credit.
"Students and parents should not be expected, in America, to wade through a mess like this," said Sen. Ron Wyden (D-Oregon), testifying before the Senate Finance Committee. Wyden said most students are not aware of college savings opportunities.
"The incentives are out of whack, and on a bipartisan basis we can change that," Wyden said. "Simplifying the tax code and making education incentives more user-friendly is not just possible, it's essential."
The bill passed the House Thursday, 227-187, but it faces resistance in the Senate and White House. There's opposition to certain provisions that would limit eligibility to fewer students and eliminate the benefit for graduate students.
"Really this is a case of the devil being in the details," Steven Bloom, director of federal relations at the American Council on Education, told WGBH's On Campus in a telephone interview.
Bloom points out that universities have long supported efforts to simplify higher education tax benefits, and he admits there are too many confusing tax codes.
"The challenge is to do it in a way that we think really addresses the broadest array of students," Bloom said. "There are elements of this bill that we think are good, and there are elements that we think need improving .”
Consolidating credits would cut off any benefits after four years, at a time when more than 50 percent of students take longer than four years to earn a degree.
"You have those students who have more complicated lives. They might have children. They might be in the military, and it just takes them longer to complete their degree," Bloom said. "And we want to make sure that we address their needs along with the traditional students in higher education."
Instead, Bloom said, Congress should adopt legislation that caps tax credits at an amount instead of over a time period, allowing students to use tax credits up to $15,000 over six years.
Inside Higher Ed's Michael Stratfordmore details on what the bill would do.
The bill would also make the primary tax credit available to Americans, the American Opportunity Tax Credit, permanent. It was initially created as part of the 2009 economic stimulus package.