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Student Aid Tax Issues

Traditional nonprofit public and private colleges and universities historically have been granted tax-exempt status. This permits them to devote more of their resources to funding student financial aid, educational activities, academic research, and community programs to achieve their core missions of teaching, research, and public service.

In addition, the Federal Tax Code contains a number of provisions directed specifically at students and families, including various tax credits and deductions, that help make college more affordable and thus encourage greater access to and participation in higher education.

 

AAU joined a letter to Senate Finance leadership urging them to repeal the taxability of Pell grants as part of the FY22 reconciliation process.
On September 3, AAU joined nine other higher-education associations in sending a letter to House and Senate appropriators to urge them to repeal the taxability of Pell grants by incorporating the “Tax-Free Pell Grant Act” as part of their final FY2022 reconciliation agreement.
Employer-provided educational assistance benefits (Section 127) allows employers to offer their employees up to $5,250 annually in tax-free educational assistance for undergraduate or graduate-level courses.
The Lifetime Learning Credit (LLC) is one of two income tax credits to help offset the costs of higher education.

91 percent of undergraduates or their parents who have out-of-pocket tuition and fee expenses – including tuition and fees financed with student loans – and also file taxes are eligible for a tax credit or deduction.

Learn more about the student loan interest deduction (SLID) and why it's important.

AAU President Barbara R. Snyder sent a letter urging Senate and House budget committee leaders to make bold investments in the health, security, prosperity, and future of our nation as they craft the FY22 budget.

AAU, AACC, and 21 other higher education associations and organizations sent a letter to Sen. Sheldon Whitehouse (D-RI) expressing enthusiastic support for the Tax-Free Pell Grant Act.
AAU, ACE, and 32 other associations sent a letter urging the House Ways and Means Committee and the Senate Finance Committee to include higher education tax proposals in any legislation that incorporates the American Jobs and American Families plans.
AAU joined NACUBO and six other associations on a letter to the Treasury Department to ensure that emergency grant aid for students included in the CARES Act is not treated as taxable income or traditional educational grant aid.