ACE and Higher Education Associations Urge Congress to Reform Tax Policies for Students and Institutions

​ACE and a coalition of higher education associations submitted comments yesterday to the Republican Tax Teams of the House Ways and Means Committee, emphasizing the importance of tax reforms that benefit college students, families, and institutions. In a letter addressed to Chairs Jason Smith and Mike Kelly, the group outlined four critical policy proposals aimed at enhancing educational access and financial support.These requests come as Congress prepares for a significant tax reform effort in 2025. Lawmakers are expected to consider various proposals to simplify the tax code, promote economic growth, and enhance access to essential services, including education. The higher education community is keen to ensure that any reforms prioritize the needs of students and institutions, advocating for a tax system that supports educational attainment and affordability.

Among the proposals is a call to reform and simplify higher education tax credits, including the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits are vital for millions of students, particularly those from low-to-moderate-income families. In 2023 alone, nearly 9.5 million taxpayers received approximately $14 billion through these credits. However, the coalition said in its letter, the current system is overly complicated, limiting its effectiveness for the students who need it most.

Additionally, the groups are advocating for the repeal of the taxability of Pell Grants, which currently penalizes low-income students by taxing the portion of their Pell grants spent on non-tuition expenses.

The letter also calls for the restoration of advance refunding of tax-exempt bond financing and the repeal or reform of the excise tax on investment income of private colleges and universities, the so-called endowment tax. The associations underscored the importance of higher education in fostering civic engagement, research, and economic development, stating, "This tax-exempt status enables institutions to provide greater access at lower cost to millions of students and conduct innovative research in fields like healthcare and artificial intelligence. In short, higher education builds America."

In conclusion, the associations asserted that tax reform presents an opportunity to enhance educational access and completion, ultimately contributing to a well-educated workforce essential for the nation's long-term economic growth.