Secure and Improve Pell Grants
A strong, competitive economy requires a well-educated society, and grants based on financial need reduce the amount that low- and moderate-income students need to borrow and encourage them to attend and finish college. Federal Pell Grants help over seven million low- and moderate-income students a year pursue higher education or training. They are the federal government’s most effective investment in college access and success, and have broad, bipartisan support from business, education, veterans, civil rights, and student groups, as well as from the higher education community. However, the purchasing power of Pell Grants has significantly declined over time. In fact, Pell Grants now cover the lowest share of college costs in the program’s history. And Pell Grant recipients continue to carry a disproportionate debt burden relative to their higher income peers. Strengthening Pell Grants must be a top priority. Based on existing research, we recommend that Congress work toward doubling the maximum Pell Grant to restore its purchasing power and increase equity in access and attainment; the grant’s former automatic annual inflation adjustment should also be permanently restored to maintain its value going forward. We recommend making Pell Grants a fully mandatory program that is not subject to annual appropriations based on projections that will never perfectly align with actual program participation. We also support restoring Pell eligibility for defrauded students to provide such students with an opportunity to complete a quality credential at another school. We support legislation introduced in 2017 (S. 1136, H.R. 2451) that reflects these recommendations, as well as Pell Grant related provisions included in legislation introduced in 2018 (H.R. 6543).
Establish a New Federal-State Partnership to Fund Public Colleges
Public colleges enroll three-quarters (76%) of undergraduates. However, state disinvestment in public higher education — paired with inequitable funding across institution types — has led to a decline in states’ ability to provide accessible and affordable higher education opportunities for their residents. To reverse this trend and restore the promise of a public higher education for all students, we propose a renewed federal-state partnership that delivers new federal funding to public colleges, focused on reducing net costs especially for low-income students and underrepresented students of color. In exchange, states must maintain or increase their own investments in public higher education. Legislation introduced in 2015 (S. 2191), 2016 (H.R. 5756), 2017 (S. 806), and in 2018 (S. 2598) all include strong maintenance of effort provisions to ensure that new federal dollars sent to states do not supplant state and other forms of higher education funding and financial aid.
Further Simplify the Federal Financial Aid Application Process
The complexity of the federal financial aid application process discourages too many students from applying for or receiving the aid they need to attend and complete college. Significant changes have been implemented to simplify the Free Application for Federal Student Aid (FAFSA), including our proposal to let applicants electronically transfer their IRS data to the FAFSA using the tax data available when students typically apply to college to determine aid, and the introduction of skip logic in the online FAFSA. These changes have streamlined the aid application process for millions of students and their families. We recommend further simplifying the FAFSA by eliminating 20 burdensome questions that cannot be automatically answered using Internal Revenue Service (IRS) data and that require students to collect detailed financial information from multiple sources. While these changes would further simplify the federal financial aid application, in order to simplify the entire process, we must also address the burdens and complexity of verification, which for over a quarter of FAFSA filers – most of whom are Pell eligible – is the final step to receiving aid for which they are eligible. Our research has found that verification remains a complex and costly part of the FAFSA process that can delay aid and derail enrollment and is furthermore an unduly burden financial aid offices. Policy and institutional changes would reduce the heavy paperwork and bureaucracy typical of the aid verification process, which can keep eligible students from getting the aid they need.
Streamline and Improve Higher Education Tax Benefits
There is bipartisan agreement that higher education tax benefits are overly complex, and their benefits poorly timed and regressive. We recommend streamlining existing education tax benefits by improving the American Opportunity Tax Credit (AOTC) and eliminating benefits that are less effective or targeted, such as the Tuition and Fees Deduction and Lifetime Learning Credit. We also recommend eliminating the taxation of Pell Grants, which keeps many students from accessing tax benefits for which they are eligible. We support bipartisan legislation introduced in 2019 (H.R. 3803) that would eliminate this unnecessary complexity. Additionally, we recommend eliminating the taxation of forgiven federal student loan debt, regardless of the reason for discharge. Currently, the IRS does not consider as taxable income loan balances discharged after 10 years of payments under the Public Service Loan Forgiveness program (PSLF) or due to death or permanent disability. However, balances discharged after 20 or 25 years of responsible payments in an income-driven repayment (IDR) plan are considered taxable. This disparate tax treatment is inequitable and confusing, and creates a potentially large and unaffordable tax liability that disproportionally affects persistently low-income borrowers.