Emanuel Proposes Tax Reform: Simplifies, Consolidates Education Costs

CHICAGO, IL—Today, U.S. Representative Rahm Emanuel (D-IL) joined college students and their families at the DePaul Center in downtown Chicago to announce the Expanded College Access Plan, a component of his Middle-Class Tax Fairness Act of 2005.

“For many, going to college is the ticket to success,” said Emanuel. “Every high school senior who qualifies academically deserves the chance to pursue a college education, and this credit will help every student pursue their dream.”

Emanuel’s Expanded College Access Plan will consolidate the five existing tax breaks students currently rely on to help pay for college: the Hope Scholarship, the Lifetime Learning Credit, the deduction for higher education expenses, the exclusion of employee-provided education benefits, and the exclusion for qualified tuition reductions.

“With every academic milestone, a high school diploma, vocational certification, an undergraduate degree or graduate degree, a person’s lifetime earning potential grows. The sad fact is that students from many families have as much as $3,800 per year in unmet expenses. For so many, that $3,800 stands between them and their future,” said Emanuel. “Combining credits can eliminate this barrier and give more students a chance to get ahead.”

The new credit streamlines the process for families, by combining five education tax incentives into one easy-to-use credit.  This simplifies tax filing and cuts down on mistakes that lead to penalties and missed opportunities. Combining these tax breaks would give more students a chance to go to college by:

Covering Average Cost of Tuition: For the average student, the combined tax credits would cover almost the entire average cost of annual tuition at public institutions and one-third of the average tuition at private colleges and universities.

Providing Refundable Credit: The tax credit would be fully refundable, so that even those students who do not earn enough to owe taxes will receive a tax refund.

Assuring All Who Qualify Full Credit: Instead of a deduction which only reduces the amount of taxed income, a credit reduces taxable income on a dollar-for-dollar basis.  This means everyone who qualifies for the credit is guaranteed to receive the full value. The effect would be to make the Expanded College Access Plan available at the full $3,000 to any college student for all four years of college.

“This law will help pay the tuition bills for those who need it the most,” said Emanuel.

This week, Emanuel also introduced the Student Aid Fairness Act. This proposal will send rebates to more than 1.3 million college students whose federal scholarships will be unfairly reduced or eliminated in the 2005-2006 school year due to a change made by the Bush Administration late last year. By revising the economic information used to determine how much students and families are expected to contribute towards a college education, this change will reduce Pell grant scholarships for 1.3 million students this year, while some additional 90,000 students will have their Pell awards eliminated altogether.  In addition, many students will also see reductions in their student loans.

“As families face the harsh reality of an increased tuition bill, they may wonder why Congress and the President continue to ignore steps they can take to make college more affordable,” said Emanuel. “This emergency action is necessary to make sure that the American dream does not slip out of reach for hard working American families.”

Emanuel has been a champion for breaking down the barriers that keep middle-class families from achieving their dreams of a college education. He was one of the architects of the Financial Aid Simplification Act of 2003, which led to the Advisory Committee for Student Financial Assistance conducting a year-long study on simplifying the financial aid process. Following the recommendations of this committee, in March of this year, Emanuel introduced the College Aid Made EZ Act which dramatically simplifies the process of applying for college aid.

“Multi-billion dollar corporations fill out thirteen-question forms to receive million dollar Export-Import Bank loans. Shouldn’t it be just as easy for high school seniors and their families to pay for college? American students deserve the same easy access to college financial aid,” said Emanuel.

The current FAFSA (Free Application for Federal Student Aid) college loan application has over one hundred questions. It can take an average family several days and sometimes several tries to fill out the questionnaire. And if one answer is wrong or inaccurately entered, they may have to start the entire process over which can delay their determinations of aid by months.

The College Made EZ Act will simplify the application process by establishing a FAFSA-EZ form. The two-page EZ form drastically cuts down on the number of questions that many students and their families must answer to qualify for college assistance.  It institutes a pre-FAFSA process allowing families more time to plan how to cover college costs by giving them a chance to apply for college assistance one year early. It simplifies the process for the neediest students by allowing for automatic qualification for students already benefiting from Federal programs such as Free and Reduced Price School lunches. And finally, it simplifies and improves access to FAFSA on the web, giving all students an opportunity to receive aid more easily through the online application process.

Emanuel was joined today by, Ambassador John Kordek, Associate Vice President for External Affairs, DePaul University; Charles Guengerich, President of Wilbur Wright College; Eddie Brambila, Manager, Illinois Student Assistance Commission; Robert M. Burke, Founder & Chairman, Tax Assistance Program – It Adds Up; Mr. & Mrs. Peter Dunn and their daughter Mary Jo of the Sauganash neighborhood. Mary Jo, 23, is a recent graduate of Loras College in Iowa; and Mr. Daniel Stamm, 30, law school student at Loyola University of Chicago School of Law.