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Proposed Legislation Would Simplify College Tax Credits

Complex tax breaks discourage qualified students from claiming benefits.

The tax code offers three major tax breaks to assist students (and their families) in paying for the ever-increasing cost of higher education: the Hope Scholarship, the Lifetime Learning Credit, and the deduction for tuition and fees. Unfortunately, these tax breaks are complex. An IRS publication explaining them is nearly 100 pages long. The General Accounting Office estimates that 27% of students who qualify for these benefits do not claim them, in most cases because they are too complex to understand.

In May the Universal Higher Education and Lifetime Learning Act was introduced in Congress with broad bipartisan support. This legislation, if enacted, would consolidates these three tax breaks into one simple, streamlined, easy-to-understand credit that would combine the best features of the existing benefits. Here is a summary of the bill's main provisions:

  • Consolidate the Hope Credit, Lifetime Learning Credit, and the tuition and fees deduction into one simplified credit providing up to $3,000 in tax relief for students and families. The bill would benefit 9 million students attending four-year public and private colleges and universities and an estimated 1.1 million students attending community colleges.

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  • July 2, 2007

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