Washington, D.C. – A targeted, consolidated education tax credit would help low- to moderate-income individuals earn the skills needed to improve their lives and the lives of their families, according to the National Community Tax Coalition (NCTC), the nation’s largest membership network of community-based organizations offering free tax and financial services to low-income working families.

More than 70 percent of Americans aged 25 and older have not attained a bachelor’s degree, limiting their job opportunities, earnings and taxes they pay to support their communities and the country. With college attendance rates for low-income households lagging 20 to 40 percent behind their higher-income counterparts, simplifying access to financial aid must become a priority.

The proposal for a single Postsecondary Educational Advancement Credit (PEAC) was released during a Congressional briefing today hosted by NCTC.

“In difficult financial times, expanding the means by which the neediest of individuals can attain higher levels of academic and professional achievement could lead to significant long-term economic gains,” said Jackie Lynn Coleman, Senior Director, NCTC. “The introduction of a unified higher education credit that specifically targets low- to moderate-income students and families simplifies the way in which such support may be provided to working taxpayers.”

NCTC lays out the argument for this tax credit in a brief titled, A Single Higher Education Tax Credit: Opportunities for Advancement through the Tax Code. In addition to outlining a new single credit, the brief details the tax credits and federal aid currently available to students, who uses the supports and why students are still unable to complete their educations.  The brief can be downloaded here: http://tinyurl.com/NCTC-PEAC-brief.

The PEAC builds upon lessons learned from past credits, incorporating their most useful aspects into a consolidated yet strengthened credit for those actively pursuing higher education.

“NCTC strongly encourages Congressional leaders to use this proposal as the impetus for supporting the educational pursuits of low- to moderate-income individuals and ensuring that all Americans have the opportunity to become part of the world’s most highly skilled labor force,” said Coleman.

Improving tax-based higher education financial supports for low- to moderate-income students will require several problems to be resolved with the existing code, including:

• Not allowing the American Opportunity Tax Credit (AOTC) to revert back to a nonrefundable credit. The tax refund is an incentive for low-income families to not only pursue higher education, but also to file their tax returns and potentially claim additional family income support.
• Extending the eligibility for these benefits beyond the current four years. Less than one-third of nontraditional students are able to complete a bachelor’s degree within five years of initial enrollment.
• Limiting the scope of the tax credits to benefit the taxpayers in greatest need of support. To preserve budget neutrality while offering more assistance, any effort to consolidate these credits must resist the temptation to be overly broad in structuring this support, erroneously benefiting students and families whose decisions to pursue higher education are minimally affected by aid decisions. In 2009, for example, only 27 percent of the AOTC went to tax filers earning less than $30,000.
•  Covering expenses that are more burdensome for nontraditional students.
  

“Our proposal is designed to help as many low- to moderate-income individuals as possible earn college degrees without adding to the nation’s budget woes,” concluded Coleman. “In addition, the consolidated credit is a potential win-win for families, communities and the nation. A more skilled and productive workforce means higher wage earners who can then contribute their share of  our nation’s tax revenue.”

Read the full brief: A Single Higher Education Tax Credit: Opportunities for Advancement through the Tax Code