Grassley, Moseley-Braun Seek Increased Access to Higher Education, Tax Relief
"It's straightforward proposal for tax relief put forward on the day Americans must meet their tax obligations to the federal government. Our bill would let taxpayers who are paying off student loans claim an above-the-line deduction for the amount of their loans every year until the loan is repaid," Grassley said.
Grassley said that taxpayers can claim a deduction for themselves, spouses or dependents. Individuals claimed as a dependent would not qualify for the deduction. The deduction would begin to be phased out for single taxpayers with a modifed adjusted gross annual income of $65,000 and end for those with an income of $85,000. The phase out would begin for married taxpayers with a modified adjusted gross annual income of $85,000. It would end for those with an income of $105,000.
"This legislation is an investment in the ability of individuals to work hard, improve their skills and build a better life. By sending a message to college students that higher education goals are valued, Congress can, in turn, encourage young people to work for academic achievements and enhanced job skills. Young people must prepare to compete in a highly competitive global economy," Grassley said.
Grassley said that the legislation introduced today actually would restore a tax provision which Congress eliminated in the 1986 Tax Reform Act. He also said that during the last 10 years total costs have increased by 23 percent at public colleges and 36 percent at private colleges. According to the General Accounting Office (GAO), tuition at a public four-year college or university has nearly doubled as a percentage of median household income.
As a result, according to the Congressional Research Service, students graduating from a four-year program leave that institution with loan debt of $10,000 on average. This means at the current capped rate of 8.25 percent for the basic federal student loan program, students also bear an additional $1,000 in interest debt. "By restoring the deduction on interest on student loans, we can send a signal that we value higher education and recognize the financial responsibility assumed by most students," Grassley said.
Grassley also made the case that as Congress works to balance the federal budget, this proposal is more "doable" than the proposal advanced by President Bill Clinton to make tuition deductible. Experts have estimated the White House proposal would cost betwen $36 and $42 billion. In contrast, the Grassley/Moseley-Braun bill affects interest on student loans, a percentage of tuition costs. "Our bill provides college students with help they need, and it is financially manageable," Grassley said.
Grassley and Moseley-Braun both serve on the Senate Finance Committee.