The repeal and revision of higher-education tax benefits in the bill passed Thursday by the House would cost students and families more than $71 billion over the next decade, according to an official analysis by Congress’s Joint Committee on Taxation.
In a letter obtained by The Washington Post, the committee provides individual scores of the education provisions in the House bill. Those that directly benefit current students, borrowers and employees seeking college credentials amount to tens of billions of dollars in revenue for the government, but lost savings for taxpayers. The committee tallied the costs at the request of Sen. Patty Murray (Wash.), the ranking Democrat on the Senate Health, Education, Labor and Pensions Committee.
“At a time when higher education costs are skyrocketing, it is extremely disappointing Republicans are trying to jam through a plan that will take money from students and families who are trying to send their kids to college — all to pay for a massive tax cut for corporations and the richest among us,” Murray said. “Republicans need to stop playing partisan games with our students’ education, and start working with us to provide more opportunities for all.”
House Republicans rattled universities, graduate students and education loan borrowers with proposals to dramatically shake up the landscape of tax credits, deductions and exclusions.
Graduate students, for instance, mobilized to fight against the proposed repeal of an exemption from taxes on the waivers that cover their tuition. Many have argued that counting their tuition as taxable income would result in a tax burden they could not cover with the money earned from working as teaching or research assistants. Repealing that exemption would yield the federal government $5.4 billion in revenue over the next decade.
Another hotly contested House proposal involves the elimination of the student loan interest deduction, which lets people repaying their student loans reduce their tax burden by as much as $2,500. Getting rid of the deduction would cost borrowers more than $21 billion in the next 1o years. More than 12 million people took advantage of the deduction in 2015, according to the Internal Revenue Service. That’s about 3 in 10 of the 44 million Americans with student loans.
Millions of Americans also take advantage of the three higher-education tax credits — the American Opportunity Tax Credit, Lifetime Learning Credit and Hope Scholarship Credit — that House Republicans want to consolidate. The government would get $24.1 billion in revenue by repealing the Lifetime Learning Credit. But that money would come at the expense of graduate students who under the proposal would be largely shut out of the consolidated tax credit.
Although policy analysts agree that tax credits should be streamlined, many worry that consolidating them without a meaningful increase in funding or expansion of the criteria would prove detrimental to people paying for college. They also worry that House Republicans are discouraging workforce development by proposing the repeal of an exemption that prevents the federal government from taxing tuition assistance provided by employers. Eliminating that statute would yield $20.6 billion over a decade, which taken with the other three repeals amounts to $71.5 billion.
“The biggest losers will be students repaying their education loans, young adults seeking graduate degrees and adults seeking continuing education to upgrade their skills in a rapidly changing labor market,” said Terry W. Hartle, senior vice president of the American Council on Education. “We’re moving in precisely the opposite direction from where we should be going.”
Some within higher education are relieved that the Republican tax bill sidesteps many of the higher-education proposals made in the House, including the graduate tax and interest deduction. Still, there is no guarantee that those provisions will remain off-limits during reconciliation.