Affording College: Consolidating Tax Credits for Higher Education (H.R. 3393)

What is H.R. 3393?

(Updated July 13, 2017)

This bill consolidates four existing tax credits for higher education expenses into a single tax benefit. The four provisions in question — the Hope Credit, the American Opportunity Tax Credit (AOTC), the Lifetime Learning Credit, and the tuition deduction — would all be rolled into a new AOTC that would be permanently extended. This new credit would: 

• offer a 100-percent tax credit for the first $2,000 of eligible higher education expenses and a 25-percent tax credit for the next $2,000 of such expenses (for a maximum credit of $2,500). 

• make the first $1,500 of the credit refundable, meaning that families could receive the benefit whether or not they have Federal income tax liability. 
• be available for up to four years of post-secondary education at qualifying four-year universities, community colleges, and trade and vocational schools and could be used for offsetting expenses for tuition, fees and course materials.
• restore income eligibility limits provided by the Hope Scholarship Credit. 

Argument in favor

Simplifies tax incentives for higher education expenses, helping the neediest students the most. Extends those credits permanently, and restores income eligibility limits.

Argument opposed

Reduces support for many undergraduates, particularly low and middle income nontraditional students. Also, what about benefits for graduate students?

Impact

College students, their families, institutions of higher educations, the IRS,

Cost of H.R. 3393

The Joint Committee on Taxation estimates that implementing this legislation would increase federal budget deficits by about $96.5 billion over the 2014-2024 period.

Additional Info

In Depth: