Fighting for Student Aid

We are in a tough economy, no doubt.  Unemployment continues to hover around the 9% range.  Federal revenues do not match federal spending levels.  A “supercommittee” has been formed to deal with rising federal budget deficits.

Few spending items have escaped the budget ax.  For higher education officials, student aid has been particularly hard hit.  In response, the Student Aid Alliance created the “Save Student Aid” campaign, with hopes of raising awareness about the importance of financial aid for students.

The campaign features a statement of support and calls for student aid supporters to sign on.  As of today, almost 100,000 supporters have signed the statement.  The Alliance intends to present the information and show of support to the congressional supercommittee as it approaches its deadline of November 23 to reach a deal. 

Pell grants and other financial aid programs are under the microscope.  The Save Student Aid alliance, and its 75 member organizations, are working hard to educate Congress about the importance of preserving financial aid.

Compromise Tax Bill Means Money for Students

The compromise tax legislation President Obama reached with congressional leaders provides numerous benefits for higher ed and its students.  Several features of the compromise are tax cuts originally enacted during President George W. Bush’s term.

They include a tuition tax credit worth up to $2,500, a student-loan interest deduction worth up to $2,500, and a benefit that allows companies to provide up to $5,250 in tax-free tuition assistance to their employees.  The last item has been discussed on previous issues of this blog under the “Section 127” debate.

As noted in the Chronicle of Higher Education, it also includes two benefits that expired at the end of 2009.  The first is a tuition deduction of up to $4,000.  The other allows Individual Retirement Account owners over the age of 70½ to make tax-free charitable gifts, totaling up to $100,000 per year, to eligible charities, including nonprofit colleges.

Will the IRA wrinkle serve to encourage highly wealthy, older folks to make donations?  Well, for one thing, the estate tax looks like it will be back.

Eliminated in 2010, the estate tax was due to be reimposed at up to a 55% rate on estates valued over $1 million.  Under the compromise language, the rate will max out at 35% and only apply to estates valued at over $5 million.  The threat of a return of the estate tax could entice the very wealthy to ramp up their charitable giving.

Now, President Obama needs to sell the deal to wary Democrats, unhappy with many aspects of the agreement.  According to the New York Times, Senator Frank Lautenberg (D-NJ) said, “I don’t think it’s a fair deal.  I think a ransom was paid, and it was a very high price.”  Obama has sent Vice President Joe Biden on a mission to convince his former Senate colleagues that the deal is a good one.

Will the compromise tax deal help President Obama’s re-election chances in 2012?  Or will it divide the Democrats as they cede control of the House to Republicans?  No doubt that negotiators in the Administration and Congress will seek to reach agreement in the few days left in 2010.  As for now, it appears that higher education advocates have succeeded in making student needs an important part of the discussion.

 

Section 127

Section 127 – Employer Provided Education Assistance will expire on December 31, 2010, unless Congress acts to make this provision a permanent part of the U.S. tax code.

From our friends at The Coalition to Preserve Employer Provided Tutition Assistance comes the following:

Section 127 – Employer Provided Education Assistance will expire on December 31, 2010, unless Congress acts to make this provision a permanent part of the U.S. tax code.

 What is Section 127 – Employer Provided Education Assistance?

Employer provided education assistance is a part of Section 127 of the U.S. tax code allows an employee to exclude from income up to $5,250 a year in employer-provided tuition assistance for undergraduate and graduate-level courses. The provision will expire at the end of the year unless Congress takes action.

 This education-assistance provision was established in 1978 and has been extended by Congress eight times, most recently in 2001. Currently, Representatives Earl Pomeroy, (D-ND) and Sam Johnson, (R-TX), have introduced the Employee Educational Assistance Act of 2010 (H.R. 5600) to make the provision permanent. In addition, U.S. Senator Chuck Grassley, (R-IA) has introduced a tax bill in the Senate that would preserve important educational tax provisions (S. 2851), including Section 127.

 Why is Section 127 Important?

This benefit helps build and maintain an increasingly skilled workforce and positions our nation to remain competitive in the global economy. Almost 20 percent of recipients are pursuing science, technology, engineering and mathematics (STEM) degrees. A 2009 Society for Human Resource Management poll showed that 76 percent of organizations offered education assistance for undergraduate or graduate study or both.

 Who Benefits From Section 127?

Employer provided education assistance helps employees better themselves without increased tax liability, and it helps employers by encouraging them to invest in their workforce.  According to a study by the Society for Human Resource Management and the National Association of Independent Colleges and Universities, the number of people receiving the benefit more than doubled between 1992 and 2007, from 431,500 to 913,100. 

 What Can You Do?

Please urge your Members of Congress to support bills that would permanently extend Employer Provided Education Assistance, Section 127 of the U.S. tax code.