 Good afternoon. For all who are here in D.C. and watching online, you can follow the conversation on Twitter by following the hashtag shared reform. So the past couple of weeks have been exciting in the federal higher education world. Just last week, Senators Alexander and Bennett introduced a bipartisan bill to simplify our student aid and repayment system. In addition, according to the Chronicle of Higher Education, the Senate Democrats plan to introduce a bill to reauthorize the Higher Education Act this week. Although we still likely have years to go before the Higher Education Act is reauthorized, it's going to be the first time we will see a comprehensive bill since the Higher Education Opportunity Act was passed. Meanwhile, it finally, finally looks like there will be movement on reauthorizing WEA. And just this morning, the Senate Finance Committee held a hearing on what role the tax system should play in keeping student debt at bay. So we've had all these events going on around D.C. and it's only 1 p.m. So if you need more refreshments, be sure to grab some outside because who knows what's going to happen this afternoon. So it was clear at this morning's Senate Finance hearing that higher ed tax reform is ripe for reform. Since its inception in the late 90s, tax-based student aid has more than quadrupled and now represents more than half of all non-loan federal aid. In 2012, the federal government spent nearly $34 billion on tax-based student aid, a billion more than it spent on Pell grants. Despite this rapid growth, policymakers haven't scrutinized this aid to determine whether it improves college affordability, access, and success. Today, the Consortium for Higher Education Tax Reform released a white paper that addresses how federal higher education tax benefits can work better for students and families. Consortium partners include the Center for Postsecondary and Economic Success at CLASP, the Education Trust, New America's Education Policy Program, and Young Invincibles. This consortium, funded through generous support from the Bill and Melinda Gates Foundation's Reimagining Aid Design and Delivery Initiative, has spent the last year identifying strengths and weaknesses in federal higher education tax policy and providing recommendations for redesign and reform. Our white paper includes a shared agenda for higher education tax reform to increase college affordability, access, and success. Our shared agenda is organized around four principles of tax reform, better targeting, simplification, timely delivery of tax aid, and outreach. Over-targeting, complexity, delayed payment, and pervasive confusion among families about what help they can expect with college costs are serious shortcomings that can only be addressed through bold action and not incremental change. Our recommended reforms would ensure that tax-based student aid goes to the low and modest income students who struggle most with college costs rather than higher income individuals who are already very likely to be attending college. We would eliminate overlapping tax benefits, making it easier for families to understand and claim tax-based student aid and deliver that aid when the college bills come due. A fully-refundable, better-targeted American Opportunity Tax Credit would become the primary vehicle for tax-based student aid. In our shared agenda, we also propose linking tax breaks for higher education institutions to their performance on college access and completion. Finally, we would reinvest any potential savings from our reforms back into students. Every dollar should be used to improve college access, affordability, and success, including through funding for the Pell Grant program. Besides the work we've done on our shared agenda, four additional issue briefs have been written by each of the consortium's members to address in greater detail four specific aspects of policy recommendations. This includes class brief that looks at quickening delivery of tax-based student aid so that it arrives when students are paying their college bills, new America's brief that looks at increasing outreach about the tax credits to ensure that students who need the aid are aware of them, the Education Trust Brief that looks at using tax-based aid as part of a broader effort to hold colleges accountable for their performance, and Young Invincibles Brief that looks at changing the way that colleges and universities borrow money. So the consortium members will be speaking more in-depth about their briefs and the shared agenda during the panel. But first, I'm pleased to welcome Lily Batchelder to give opening remarks. Lily is Deputy Director of the National Economic Council and a Deputy Assistant to the President. Prior to this role, she served as Majority Chief Tax Counsel for the U.S. Senate Committee on Finance. Since 2010, she has been on leave from NYU School of Law, where she was Professor of Law and Public Policy, Co-Director of the Furman Academic Program, and an Affiliated Professor at the NYU Wagner Graduate School of Public Service. While in academia, she was an Affiliated Scholar at the Urban Brookings Tax Policy Center and a member of the National Academy of Social Insurance. Her research focused on tax law, social insurance, and the impact of fiscal policy on economic security, income disparities, and intergenerational mobility. So I'll hand it over to Lily. Well, thank you, Rachel, for the kind introduction, and thanks to the New America Foundation for having me. And thanks also to Kelsey Merrick, who's here from our team and is the real expert on all of these issues. For all of you at the Rad Consortium, I also want to thank you for your really valuable work that you're doing on these issues, not just in developing innovative ideas, but in focusing our attention on these issues to make sure that our economy is ensuring that education tax benefits are really effective and well-targeted. Making sure that students can access, afford, and succeed in college is a top priority for the president. As you know, tuition and student debt are on the rise, threatening the ability of the next generation to attend college. And at the same time, a post-secondary education remains one of the best investments someone can make into their future. And one of our most important policy levers to grow the economy, create jobs, and promote economic mobility. Over the course of one's working lifetime, the median earnings of a bachelor degree recipient are 65% higher than the median earnings of a high school graduate. That's nearly $30,000 each year in higher earnings. And as everybody here knows, getting a college degree has a lot of positive effects beyond these higher earnings, including lower employment rates and even improved health outcomes and longevity. All of these benefits mean that education is one of the surest paths to the middle class. For example, a child born in the bottom 20% of the income distribution has a chance of making it to the top that is quadruple if they get a college degree. Unfortunately, despite these huge benefits, low-income students are far less likely than their peers to either attend or graduate from college. According to research by Martha Bailey and Sudinarski, more than half of students born into high-income families get a bachelor's degree by the time they're 25, but only one in 10 kids do from low-income families. This is unfair to kids from low-income backgrounds. It's also bad for our economy. It means we're leaving some of our best and brightest on the sidelines simply because of the happenstance of their birth. Action at all levels is needed to address these enrollment and graduation gaps. And that's why the president and the First Lady's call to action on college opportunity was launched earlier this year. It calls on colleges, philanthropies, state governments, and CEOs to take new actions that increase college enrollment and achievement among low-income students. In January, over 100 college presidents and 40 nonprofits and other organizations announced new actions, including commitments to expand need-based aid for low-income students. This is also why the president, from the first day he took office, has been making sure that federal financial aid is robust and available to the students who need it most. We're proud that during this administration, Pell grants have been increased by nearly $1,000, which benefits about 9 million students every year. We've established new options for borrowers, like the pay-as-you-earn plan, which ensures that borrowers don't have to pay more than 10% of their income on student loans. And getting to today's topic, we're very proud to have enacted the American Opportunity Tax Credit. Because it's partially refundable, the AOTC provides education benefits to many low- and moderate-income students who never benefited from education on tax benefits before. And because of it, 11.5 million students get about $1,100 more in financial aid every year on average. The AOTC replaced the Hope Credit, increasing the level of aid and expanding eligibility. The Hope Credit was less generous and less well-targeted in three important ways. First, by replacing the Hope Credit with the AOTC, we increased the maximum credit from $1,800 to $2,500. Second, it made the credit available for four years rather than two. And finally, and maybe most importantly, it allowed students and families to claim 40% of that benefit up to $1,000 as a refundable tax credit. Combined, these changes have made the tax benefits for education more progressive and better-targeted on low-income students. And as we know from the literature, financial aid that's targeted on low-income students and other students on the margin tends to have a much bigger effect on college outcomes. Also, because the AOTC is available for four years, instead of two, it may do a better job than the Hope Credit at encouraging persistence and completion of a four-year degree. While Congress has twice voted to extend the AOTC in 2010 and 2012, unfortunately, it's scheduled to expire at the end of 2017. Making the AOTC permanent, along with other improvements to tax credits for working families, is a top priority for this administration. But we're going to need your help to make sure that that happens. Without an extension in just a few years, nearly 12 million families will face a major tax increase. And most low and moderate-income students will lose access to financial aid through the tax system. Relatedly, it's also critical that we extend the expansions of the child tax credit and the earned income tax credit that expire at the same time. While these aren't particularly or specifically focused on education, not only do these expansions lift 1.4 million working families out of poverty each year, but they also help low-income parents invest in their own and their children's future. And in particular, there's some recent research that suggests that high school students from families that benefit from these expansions may be 2% to 3% points more likely to attend college as a result. Despite these accomplishments, though, we can and should do more. Education tax benefits are a substantial part of our federal tax system and financial aid system. There are 18 major tax benefits that support post-secondary education. And in total, as Rachel said, they offer more than $41 billion of support each year. That's more than one-fifth of all federal support for post-secondary education. So we should be looking for ways to make sure that these education tax benefits are simple and effective to the extent that we can. In fact, the president has proposed a number of changes to improve the tax components of our federal financial aid system. His budget first calls on Congress to clarify reporting on the tax form the colleges send to students each year so that students have the information they need to apply for education tax benefits. This form is the 1098T and is often incomplete and not all students receive it. In fact, one-quarter of all AOTC risked returns don't have a 1098T. So this, of course, makes it difficult for students to claim the credit and for the IRS to administer it effectively. Importantly, the president's budget would also exclude student loan forgiveness from taxation. As many of you probably know, just a few weeks ago, the president acted to expand access to the pay-as-you-earn repayment plan to 5 million additional borrowers. But under current law, student loan debt that's forgiven under this program is subject to income tax. So this means that low and moderate income students would often face a large tax bill that they're ill-equipped to pay. Borrowers who have played by the rules and made regular payments for 20 years or more, we think should get the benefits of loan forgiveness without a large and probably surprising tax bill. The president's budget also addresses the so-called Pell-AOTC interaction, which may sound arcane, but though we've made the AOTC available to millions more low and moderate income students, they are still leaving millions of dollars and actually hundreds of millions of dollars on the table each year because of how the complicated tax rules apply. Particularly, Pell Grant recipients face a complicated decision at tax time because the amount of AOTC that they can claim depends on how they treat their grants for tax purposes. The AOTC is for tuition and related expenses like books. The Pell grants, on the other hand, are available for all of the costs of attendance, so including living expenses as well. Many Pell Grant students can get the most education tax benefits if they apply their Pell Grant to their living expenses on their tax return. That way, they can use their tuition to qualify for the AOTC, which is quite generous compared to Pell Grants, at least at low levels. But many of them don't do this either because they don't know that they can or because doing so would make their Pell Grant taxable. Struggling students shouldn't have to pay tax on their Pell Grants in order to qualify for federal financial aid. So the president's budget would eliminate this dilemma by excluding Pell Grants from tax and also from the AOTC calculation. If enacted, more than one million families would see an average benefit of about $950 per year, and millions more would benefit from the simplification. In many cases, these families are already entitled to the same tax benefits under current law, but either aren't claiming the AOTC or are claiming less than they're eligible for because of the complexity. I'm optimistic that we can work together with Congress to make these and other improvements to our education tax system. As Rachel mentioned, I used to work at the Senate Finance Committee. And when I was there, there was huge enthusiasm on both sides of the aisle for making our education tax benefits simpler and more effective. As she also mentioned, Chairman Wyden and Chairman ranking member Hatch kicked off a new series of hearings on tax reform this morning. And the first topic that they chose was education, which I would take as a good sign. My Treasury colleague, Assistant Secretary Mark Mazur, just testified on education tax before that committee. And on the House side, the Ways and Means Committee is marking up an education tax bill tomorrow. So it's a big week for education tax. That said, we're not waiting on Congress to make improvements right now. You may remember that the president talked about this being a year of action in his State of the Union address. And we're continually looking at what executive actions we can take to improve programs across the government, including education. And very much welcome your ideas. And some of the great papers today, I think, have a lot of ideas that we should consider. One step we can take is making sure students and families know what help is available when they're deciding whether and where to go to school and whether to stay in school. Better publicizing the availability of financial aid is especially important for low-income students and families, because they're more likely to face cash constraints and are more likely to overestimate the cost of tuition. Unfortunately, too many of these families believe a college education is out of their reach, in part because they don't know what aid is available. The Department of Education has taken steps towards improving the salience of college costs and financial aid. For example, they've simplified the online FAFSA. And with the CFPB, they've launched the financial aid shopping sheet that more than 2,000 colleges have volunteered to adopt, which represent nearly 8.7 million students. The shopping sheet provides families with easier ways to compare costs and compare aid packages across different colleges. And just recently, the president also announced the new FAFSA completion initiative. This is a great partnership between the Department of Education and States, which enables schools and districts, or enables them to notify schools and districts of students' progress in completing FAFSAs, and thereby helps schools give students the support they need to make sure that they actually complete the FAFSA. The president's also taken several steps to keep student debt affordable. As I mentioned earlier, just a couple weeks ago, he directed the Department of Education to extend the pay-as-you-earn repayment option to 5 million more borrowers. This would allow students with direct federal loans to access a repayment option that caps their monthly payments at just 10% of their income, regardless of when they took the loans out. The department's beginning a process to amend its regulations this fall with a goal of making this new plan available by December 2015. We're also working hard to make sure that students understand education tax benefits and take them into account when making college decisions. Because these benefits are delivered separately from other financial aid and are only available when tuition bills are due, students and family, it's often don't know that this extra help is available. Better integrating education tax benefits with other financial aid could help address these barriers. And at a minimum, we should be doing everything that we can to make sure students and families access benefits that they're already entitled to under current law. To this end, the Department of Treasury issued a new fact sheet two weeks ago, highlighting that complex interaction that I was talking about between Pell Grants and the AOTC. It clarifies the current rules about how Pell Grant students can claim the AOTC and provide some rules of thumb for how students can make sure they're getting the full AOTC that they're entitled to. For example, it clarifies that virtually all Pell recipients should claim at least $2,000 of their tuition expenses for the AOTC, even if it means paying tax on their Pell Grant. Meanwhile, Treasury is working to educate tax preparers and tax software developers to address this interaction situation as well and make sure that students are optimizing and claiming their AOTC. We're also working to gather with Treasury and the Department of Education to improve our outreach to students in colleges to better develop resources on education tax benefits. And we were encouraged, by the way, to seek last blog post last week in introducing their new report on advancing the AOTC, also explained this Pell AOTC interaction and linked to this new Treasury fact sheet. This is exactly the kind of cross-pollination we're hoping will happen in order to get the word out and make sure that students aren't leaving hundreds of millions of dollars on the table that they're owed. So in closing, we've made great strides since the president took office in increasing access to financial aid, making student loans more affordable, and expanding education tax benefits to more students. But we have a lot more to do. And we look forward to continuing to work together and to digging into a lot of the great ideas that are being surfaced in today's papers. And thank you again for having me. I just want to take a moment again to thank Lily for joining us today and lending her expertise to this conversation. It's been very informative. And like she said, there's just a lot going on right now with tax reform and with higher education, more generally with lots of legislation coming out. So we look forward to seeing what the future may bring with all of this going on. So right now, I'm going to call up our consortium members for a panel moderated by Libby Nelson from Vox. She's going to be seated at the far left so they can start coming up. But so we have Libby Nelson from Vox. And then from left to right, we have Steve Bird, who's a senior policy analyst with New America's Education Policy Program. Steve Holt, who's a principal with Holt Solutions and consultant to CLASP. Michael Dannenberg, director of higher education and education finance policy at the Education Trust. And Rory O'Sullivan, deputy director of Young Invincibles. So I'm going to hand it off to Libby. Thank you so much, Rachel. And since we've talked a little bit already about higher ed tax benefits and where we stand now with policies as they currently are, I really just want to get into it and talk as much as we can. I'd like to leave some time for questions at the end. So please be thinking of them and hopefully we'll be able to do a round once we've finished up with our discussion segment of the day. So one of the things we heard a little bit about already is the state of play on higher ed tax credits as it is now. We have four papers here and a consortium paper as well that all call for some kind of reform. And I'm hoping we can start with why you see the need for this reform and what the greatest problems are that it could solve. Well, as they stand now, the tuition tax breaks are not a particularly effective form of student aid. Overall, the government's multiple tuition tax credit and deduction programs are poorly targeted with a substantial share of the money going to high income families. The current AOTC is only partially refundable, meaning that low income households that don't earn enough to pay taxes are not eligible for the full benefit. In addition, tax-based aid doesn't reach students at the time college expenses are incurred. Students and parents only receive this aid after filing their taxes, which could be as long as 15 months after college bills come due. Providing a better targeted, fully refundable AOTC in a timely manner, as our consortium has proposed as an important step in helping low income students pay for college. So one proposal is to allow students to access the tax credit much, much earlier, not just after they've paid the bill and then filed their taxes and then waited for the refund to arrive, but much earlier in the process. Steve, I'm hoping you can tell us a little bit about how that would work. And this really is essential that right now the way the AOTC is structured or any of these tax credits is you basically gotta have the resources to be able to pay for college and then wait several months before you're able to get the tax credit benefit. That really does not help the students that we most want to help to get into college and even thinking ahead to be planning how is college feasible for them. It's complicated because you're trying to merge academic years and the way that we pay for college with a tax system that's all based on a calendar year system and the Treasury Department just came out in a report to Congress with some notes on this subject, basically saying the administrative part of doing something like this would be very complicated. What we advocated in this brief is to say, you know, this is really a good time to start thinking outside the box and technology is a good solution here to be able to help us out with this. If we can set up a system of essentially online accounts for people, we call it the My College Tax Credit Assistant, which will do something very simple in terms of you can go on and just enter in some numbers and estimate what you think your tax credit would be. This is very similar to what we already do for the earned income tax credit, but then really move beyond that and make this a data hub. There's a lot of information out there that needs to be gathered into one place to determine who should be eligible for credits and for how much. So we can take a data hub where someone can set up an account and say, you know, I want to take advantage of tax credits, here are the students in my family. The IRS can then match that with the most recent tax return information that they have. The taxpayer can update that information as necessary, but most importantly, the higher education institutions where the students are attending are then able to send the information to say, yes, this student is enrolled for this academic period and this is the amount of money that that student is paying. That then gives you the real-time data you need to be able to make not exactly real-time delivery of the tax credits, but able to provide those dollars much closer to the time when someone has to come up with the money. So we can get a much more rapid turnaround and people are able then to get directly deposited into a bank account or if you do not have a bank account, a prepaid debit card to be able to get that money and to be able to stay in school and finance their education. Just as importantly for the IRS and for the taxpayer, then at the end of the year when it comes time to file taxes, we already have a lot of that information in hand. That can then be used to help populate the tax return and in this process, we think that we can get rid of the Form 1098T that's already been talked about, which as everyone notes is quite problematic and not particularly useful, at least in its current form for taxpayers, as well as the 8863, which is not the friendliest tax schedule form either. So by having this information and again in a more technologically updated environment, we'd be able to get the money to people sooner and you really make these tax credits work better for students to think about and get in and stay in school. Michael, your proposal is not just about tax credits, it's really about a broader accountability system for higher ed as a whole, but tax credits certainly have a role to play in that and I'm hoping you can tell us a little bit more about your proposal and what role the tax system plays in it. Sure. I think there's a lot of consensus in the field, at least among policymakers and wonks that the tax credits in particular need to be targeted better. But people tend to think about that targeting in terms of people and income. They don't think about it as much in terms of place and that's where our consortium came to, which is not only an agreement on targeting tax credits toward the people who need the most, but the places that need them the most and where there's the most likelihood of success. We attempt to define those places and make that applicable to not just tax-based aid but also other higher education title IV aid, including Pell grants and student loans. We at the Education Trust define sort of minimum institution eligibility so that you would be able to get tax benefits or those institutions would be able to get tax benefits if they meet certain minimum criteria that are consistent with other federal financial aid. Specifically, whether or not an institution is serving low-income students at a bare minimum level. For us it's a 17 percentage point Pell representation so about 17% of your students have to come from working class or low-income families or more. It's a minimum graduation rate of 15% over six years for a four-year school so your drop-out rate should be better than 85%. And it's a minimum loan repayment rate. If you were to use cohort default rate as a proxy that'd be about three out of 10 borrowers are able to repay their loans. Lily mentioned earlier that there were a number of institutions that came to the White House for a summit and pledged action to improve low-income student access. One of them, for example, is the University of Virginia which pledged to do more outreach. What people don't know is that the University of Virginia six months later announced that it was gonna cut grant aid to students from the lowest-income families. So they pledged action on one part but then they also on the back door were taking other actions that would have undermined low-income student access. So what we're trying to do at least in our proposal and for our consortium is not only target aid to those who are needed most but also hold institutions accountable for their performance. And that's much as Steve's proposal, suggestion a little outside the box but we don't really think it's outside the realm of possibility. Senator Charles Grassley about seven years ago threatened tax exempt status of institutions of higher education that were not devoting a sufficient proportion of their very large endowments to trying to make college more affordable and a lot of institutions howled but a lot of institutions also without any legislation ever being written took subsequent action to improve their financial aid programs. We're hoping that the same will happen in this context here when it comes to low-income student access and performance with respect to student completion and loan repayment. So we've talked a lot about tax benefits for students and for their families but institutions also have tax benefits and this comes into play a little bit in Michael's proposal and Rory, I know it's really at the center of yours. So I'm hoping you can tell us a little bit about what you would do with these tax exempt bonds. Really exciting, thank you Libby. I know it was a thrilling introduction, I'm really sorry. No, no, you did well. So I mean Young Invincibles really attacks this issue where we went combing through the tax code looking for ways that we can save money particularly in times of tight budgets and be able to spend it on students who need it most where we know there's a lot of research and investing in things like the Pell Grant are actually much more likely to increase access and success for students what we really care about rather than on some other areas and one of the key areas where we came across were these tax exempt bonds and bonds as you guys know is basically like an IOU that in this case institutions will give out to investors so they can build capital projects anywhere from academic buildings to gyms and what the federal government does is exempt the interest on these bonds that the institutions pay. So it makes it cheaper, the institutions don't have to offer as much interest to be able to attract investors in their institution. We end up spending or are expected to spend about $18 billion as taxpayers between 2013 and 2017 on these tax exempt bonds but there's a couple key problems with them where we're not really using the money as efficiently as we could be and we think we could make some reforms to save money and invest it in areas where we think is more beneficial and I'll briefly the problems and we can dig into bigger details if you guys really wanna know but the way it shakes out the bonds are relatively inefficient and poorly targeted so they're inefficient because for every dollar that the federal government expends on exempting interest only about 80% of it actually goes to the institution the thing that we're trying to subsidize and 20% of it goes to investors and then of that 20% it's not very it's a related problem but it's not targeted because it's often captured by the highest income investors. As you know we have a progressive tax code which means that your marginal tax rate goes up on each dollar that you make, right? So that as a higher income investor is gonna have a bigger incentive they're gonna get a bigger tax break from these taxes and bonds and so most of the big savings are gonna go to higher income people rather than investing in things like low income students through Pell grants and basically to make a long story short there are these other bond vehicles out there called tax credit bonds and we choose a particular type called a direct pay bond and rather than giving the tax exemption the subsidy through exempting it to investors basically we would just pay the schools directly for the exact subsidy that we want to give them it still allows them to charge a lower interest rate on the bonds but it ends up saving us money that's not going to higher income investors and that we can save and spend on things like Pell grants where we know it's gonna have an effect that we want it to. In addition we also basically cite Ed Trust's work here and in noting that basically any higher education institution public or private regardless of your performance can take advantage of these taxes and bonds why would we do that to someone who's got a graduation rate of 2% let's set some minimum standards in terms of performing for students and taxpayers in order to get this kind of subsidy so we can talk more about this bond vehicle if you guys are really excited about it but basically we think we can be more efficient with the way that we use these taxes at bonds and set some minimum standards for who can qualify for them. Well great, well before we sort of start our group discussion I want to go out even maybe one level further here. I've been covering financial aid reform for a couple of years, seen a lot of proposals and I'm honestly a little surprised that we're here talking about what can be done with tax credits because quite a few of those proposals end with and we should get rid of them so I'm wondering if you all can address why you think these are necessary or why you're choosing to address the problem in this fashion. The New America Foundation in our original RAD report and report for the Gates Foundation had called for getting rid of the tax breaks. As I said we think that they are not well targeted and don't come at the right time for students but given the political realities that these tax based aid is popular and is going to stay we felt that the best thing to do is try to reform them to make them more favorable for low income students. I mean we basically discussed this option of absolutely just closing the exemption for taxable bonds and I don't think given the reality and the weight the institutions have in Congress that that would really be a possibility for us and so we had seen some of these other vehicles that actually make the system much more efficient and certainly I think people can understand there was some benefit to, particularly for things like academic buildings in making it a little bit cheaper and investing institutions so they can invest in education for their students so certainly some argument to be had there so if we're gonna do it our thought was and we're not gonna spend too much time on something that's just not viable why don't we just make the system work a heck of a lot better. So why isn't it, I'm gonna follow up with that if somebody can explain a little bit better why the political climate would never permit the ending of higher ed tax credits. I was looking for that. I'm not having worked in politics quite a bit for quite a while I'm not willing to say that it would never permit I mean it is where we are right now. Let's keep in mind that the hope opportunity tax credit or tax scholarship had an income cap of $120,000 families incomes up to the 80th percentile were eligible for that. Lily mentioned how the Obama administration made some market improvements in the American and formed the American opportunity tax credit in terms of expanding its length from two to four years going from $1,500 to $2,500 and most importantly making it refundable for low income families. What she also didn't include is that the administration and Congress agreed to heighten the income eligibility threshold to now I believe it's $180,000 which is putting you up when the 90 to 95th percentile of income nationally so what was originally designed as a tax credit for help middle class families access higher education afford higher education has become something that reaches all the way up to the 90th plus percentile of families when it comes to income to the extent that's Davis and Black that bill that's pending in the house moves those tax credit tax credit eligibility down is a victory in the right direction but politics is sort of the art of the possible and we want to be relevant while also being responsible. And I think by highlighting these the credits and getting the discussion going it can change that politics in some ways and I think you saw that at the Senate Finance Committee this morning where this issue of should we be doing this tax credits or Pell Grants was at least surface. One of the things that's come up in other discussions about these reimagining a design papers is how it can be used to change institutional incentives and align colleges with completion efforts or with other sort of higher ed policy goals. That's a little more difficult with tax credits since they don't ever pass through the institution. So I'm hoping you can elaborate on how tax credits can or should be used to change institutional behavior. You want to start with that one? I think you want to go back. I like to cite the example of Senator Grassley from several years ago in endowments but we've seen this elsewhere as well. For the law students or lawyers in the room you might be familiar with the Bob Jones case, Bob Jones versus the United States. I think it was 1983. Bob Jones University engaged in far more heinous policies than we are discussing in terms of the minimum institutional eligibility criteria here. There it was discrimination prohibitions on interracial dating and so forth. The IRS went after Bob Jones University's tax status, tax exempt status. And that was Bob Jones University's suit. That was a case that went all the way up to the Supreme Court. And eventually the court sided with the Department of Treasury that there was a compelling interest in eliminating racial discrimination such that tax exempt status could be touched by the government. And contributions to Bob Jones University went down immediately after, I think 10 to 15% the following year. About 10 years ago, Bob Jones University apologized for its policy which it subsequently changed. So it's a mighty strong lever but that doesn't mean that it's a lever that should not be used, particularly in egregious cases which are the cases that we are pointing to at the Education Trust of institutions wholly failing on their public responsibility in terms of low income student access and overall student success. One of the things that we feel like colleges fail at really is communicating to students about the AOTC. And that's one of the things that was a very big part of our paper. Right now financial aid administrators don't consider themselves to be, or they aren't tax professionals. And so they don't even like to talk to students about the different tax credits for fear of the legal risk of providing tax advice. And because of that, I think a lot of low income students never find out about the credits, don't know how to gain access to them. So we think it's very important that colleges become a much bigger promoter of the tax credits. I mean, one thing I would add on the incentive side in particular about the bonds that we really looked into is that the subsidy could reach, and we've seen studies that estimated roughly $400,000 for every million dollars the school let out in bonds. I don't think, we couldn't figure out, but I don't think that number was actually discounted over the life of the bond, but needless to say, a pretty substantial subsidy that the schools expect to get from this tax exemption and could be a powerful incentive where there's some minimum standards in place. These are all a lot more, I would say detailed and in-depth proposals than we've seen so far on congressional bills on tax reform and tax simplification. And those have really, you guys have really tended more toward the reform side on this than I would say they have tended much more toward simplification and getting rid of some of these smaller benefits, covered all savings accounts, that sort of little provisions that if you have a tax repair, maybe you know about, but if you're a low income student in college, you don't. I'm wondering if you could address the pluses and minuses of that approach and what could be lost if tax reform should actually proceed along these more simplification-oriented lines? Well, we're definitely worried that in some of these proposals that the money that would be saved would go to deficit reduction and wouldn't be put back in for students. And that's why in our consortium proposal, we call for all of the money saved to go back into student aid, including into Pell grants. Well, simplification is a big part of the shared agenda that we're talking about also is getting rid of a lot of those provisions that confuse families. It's very hard when you sit with 18 different things to know, first, there are 18 different things. And secondly, try to figure out which of those are most beneficial for you. I think last, it's important to keep in mind, tax reform does not move fast. And we are at a stage now where we're coming up, unbelievably, on a presidential campaign just having an election. So our hope is that we're putting out ideas in addition to the milieu in Congress which is paying attention to issues like simplification where all can kind of come together and we can have something that's much broader, much more significant, that has an intellectual base that really does improve opportunity for low-income, middle-income families. We've got a little more time, so we've already brought up the Senate hearing this morning. Steve, I know you were watching. I don't want to put everybody on the spot in case, like me, they had other things they were doing. But I'm hoping you can lay out a little bit. We've got sort of parallel higher ed policy issues going here. We have the Higher Education Act from the Senate Health Education, Labor and Pensions Committee being proposed later this week. But tax reform, this would not go through that. This would go through some sort of other finance committee process altogether. And so I'm hoping you could give us an idea of where the Senate's head appeared to be on this this morning and what they were interested in. Well, we do. I get to play oracle. I think I was very encouraged that there was, this is certainly something the chairman Wyden emphasizes as a bipartisan approach to this. And certainly I think that was evident both in the witnesses that were there today, what they presented as well as in the questions from the senators. So I think it, again, it's very hopeful, as Lily mentioned, that this is where they started and that this is a place where we can really get some accomplishment. What sort of, you know, if you were to make one over, like one overarching recommendation out of each of your reports, either the one that you think is the most politically plausible or the one that is the most important and I realized that those can be two completely different recommendations. What would you make? Make the case very quickly to the Senate or to whoever. I mean, we actually, I haven't really got, I didn't really get into as much on our paper. And we have a number of recommendations related to outreach. We want to, you know, because these kind of changes that we're talking about in our consortium will only be beneficial if low income students really know about the tax credits and know how to claim them. And as I said, a major obstacle that low income students run into is that college financial aid administrators don't talk about the credits. And so one of the suggestions that we have is that they play a much more aggressive role in promoting the credits. That they look to see, look at people's FAFSAs and they look to see if students have claimed the credit or not and then if they haven't to bring them in and to help explain it. We also think there are big roles for the education department, the IRS, the Europe and TRIO programs. And I know I'm giving more than one. So anyway. I think outreach can qualify as one over our general recommendation. Yeah, a lot more outreach would be best. Well, as I mentioned, we talk about that the basis of a timely delivery tool would be something, an interactive web-based system that we're calling the My College Tax Credit Assistant. The first thing that that could do and that could be developed within months, I think, is to exactly dovetail with what New America has said, be this place where you can go and say, how much of this would I get? Guidance counselor can go in and sit down with someone and say, you know, let's look at what the tax credit might be and how that might fit in. And then to require that similar kind of information be on award letters from institutions or on the shopping sheet. I think there's only one thing I could do with that draws from the consortium's overall proposal. It would be to heighten refundability. Right now, only 40% of the AOTC is refundable. Even Davidson Black, who are doing a decent job in trying to increase targeting, bumped that only to, I think, 60%. Refundability would be the single most important thing is to have the most impact on the most low-income students. If we were separate from the tax side, because the Education Trust is proposing two different things, or it has a proposal that touches on two different things, if we were separate from the tax side and we were looking more at Title IV aid, which is help committee jurisdiction, there I think the single most important thing we could do is to establish minimum institutional eligibility standards based on success with students, particularly completion rates, but also loan repayment rates. And I would underline Michael's point on refundability. I think that'd be the top priority for us. And then for our individual paper, we've seen the types of reforms that we're talking about. We've done the same thing before with the Build America Bond Program and the Recovery Act. All the evidence suggests it worked really well. It's a fix that makes bonds, tactics and bonds work a lot better for the federal government, so we should just do the same thing here. I wanna move to questions. Do we have a microphone or something that's gonna go around? Wonderful, and if you could just state your name and your organization before you ask, that would be fantastic. Hi, my name is Matt Cohen. I'm with the Cohen Strategy Group. My question's around standards for higher ed institutions. Every other industry is regulated and has to comply with certain standards. What's gonna have to happen in order for higher institutions to be held accountable, not for enrollment, but for outcomes, including repayment? I think we could all address that. But Michael, do you wanna start and we can go from there? That's an excellent question. Right now, institutional eligibility, at least for federal financial aid, is based on what's called the triad. It's whether or not the Department of Education blesses an institution in terms of its financial capability to administer student aid, whether or not the state authorizes that institution to operate in the first place, and then something called accreditation, which is an even more boring subject than tax-exempt bonds. False. It depends who you're talking to. It depends who you're talking to. But in short, the way accreditation works is institutions are validated by other peers based on a variety of criteria that range from, that are generally input-related and are very specific in their application to sort of review panel volunteers that comes and looks at an institution. To our mind, the federal government needs to take its role in protecting the public FISC, a little more seriously, beyond simply whether or not an institution has the ability to administer financial aid benefits and reports correctly on various data. But instead, federal government should be looking at outcomes. To the extent we can shift the focus to outcomes, we can free up institutions from a focus on inputs and regulation. I think that makes a lot more sense for all parties involved. Anybody else wanna jump in? I know there are others on the panel with opinions on this. Hi, I'm Brenda. I'm with the Lumina Foundation. I actually had a question about the My College Tax Credit system. How do you envision bringing this to fruition? Would it be through a provision in HGA or working with another system or through some other form of legislation? There are many paths to reform, so I don't wanna say none of those would work. I do think this is most appropriately an IRS function because it is a tax credit and the interaction that we're talking about is based on tax rules. So I think the IRS doing it, as they do the EITC assistant right now, I think makes the most sense. I think there's some opportunities when we look at timely delivery for looking at potentially some pilot projects to be able to test some of these ideas. And so I'm hopeful that tax reform legislation, as it moves forward, it at least include that kind of support for innovation. Hi, Alex Gold by Partisan Policy Center. I'm wondering if you could speak a little bit to whether you envision any part of the proposals that you're addressing the cost of college as in we're better targeting the tax incentives and dollars to low-income students, but is there anything here that could actually control the costs instead of just providing more funding for it? Thanks. What's the site? I mean, there's some of the institution eligibility metrics that Ed Trust goes into when you're talking about things like, I mean completion rates too, but certainly like repayment rates and improving on the cohort default rate metric that we already have in there. That does get at cost. You know, as many of you probably know, for those of you don't, I was a negotiator on the negotiated rule-making panel for the gain for employment regulations that looked at implementing some of these accountability metrics for career programs. And one of the key ways to meet some minimum standards in terms of ensuring that your graduates can actually repay the debt they're taking out is to reduce tuition. So yes, I do think some of the, what we get out here does address the cost issue. The Education Trust is participating in two RAD consortium. One is on tax and one is on grants. And they're both born of our original proposal called Doing Away with Debt that was supported by the Bill Mill and the Gates Foundation which suggested consolidating a variety of federal financial aid programs including on the tax side and delivering a large chunk of that aid to states who would then pass it down to institutions in the form of increased grant aid for students from low-income families. The importance of this is that states are the number one driver of increases in public college tuition and fees. As the states have disinvested, colleges have backfilled those cuts through higher tuition and fees. So at least our view at the Education Trust is that a lot of the benefits that currently are poorly targeted in the tax code and beyond would be better delivered through states to low-income families and using the leverage on states to get them to invest in higher education in a way that will slow the growth in tuition and fee increases. In the back row. Hello, Megan Trace with the United Way Worldwide. I guess I would return to the moderator's question on political viability and ask for the panel to speak to you, the proposals and what, given your sense of monitoring the houses tax reform working group conversations last year and I guess conversations around making the extension permanent, what do we think the outlook really is for at least a permanent extension of what we have and maybe the refundability question. I know that's a big takeaway from today's is expanding refundability. So what's the sense on the hill from that aspect? I actually wanna add, that's a great question. I wanna add a tiny bit onto the end of it, which is, if an extension is the best that we can hope for is preserving the status quo a helpful or harmful thing in the long run. We wouldn't, you know, obviously from what the consortium has proposed, preserving the status quo is not, we don't think is enough. We think that there definitely has to be a lot more change the credits to make them to make them helpful for low-income students from looking at what's gone on on the hill. I think that with refundability there is some hope for at least a little bit of increases. In terms of better targeting, I'm not quite sure. We've seen that there are Senate Democrats who very much would like to see those, see them go to even wealthier families. So we'll see. Can I jump in? Sorry, go for it. First of all, I shouldn't be surprising to people who know us that I disagree with Steve Byrd, who I hired at one time to come to New America. The biggest mistake of your- That's true. I think very highly of them. First of all, I think the prospects for targeting are positive. In my experience, Republicans and Democrats support targeting aid to low-income families, particularly in the education space. You know, we saw this, for example, reaching back to the last elementary and secondary education act reauthorization, the Child Left Behind Act, where there was a pretty substantial improvement in targeting of aid, title one aid to low-income families, including cutting out school districts that were very, very wealthy from receiving title one benefits. I also think that the prospects of extension of the current tax credits, at least, is high. I mean, we saw that when the Bush tax credits expired that there was already extension and that the political dynamic has not changed that appreciably in Washington. And last, what I was most pessimistic about was our call for expanded refundability, our collective call. What I said was I think the most important change that could be made because historically, Republicans have been averse to that. They see refundability as a grant program spending and something that the tax wonks, sorry, Steve, say is outside the realm of what IRS does there in the business of collecting revenue, not giving it out. But the Davis Black bill, I think, is sort of groundbreaking in that it heightens the amount of refundability on a bipartisan basis, at least as introduced. And I don't want to say that's a game changer, but it's definitely a notable moment for the prospects of increased targeting, permanence, and heightened refundability. One of the encouraging things is that this doesn't really turn into a partisan issue as much. You don't see Republicans calling for the end of the tax credits and Democrats calling for increased. So in one area, we actually have some bipartisan support. So I would expect definitely an extension would occur. And I think one theme and that people keep talking about in terms of political viability is revenue neutrality. And one thing that our shared agenda does is say, you can do these things and pay for them as part of a single package. And I think that's an important thing to have out there as well. And how does that work? How do you achieve that revenue neutrality in your proposals? Well, we'll take 20 minutes. Well, the biggest thing is to target. I mean, that's the biggest, to target in terms on one side to save refundability, to make sure that we provide the full value of these benefits to low and moderate income families. And then, and Michael was talking about this earlier, that this creeping, untargeting that has occurred in these programs that we curtail that and we get the benefits really going to the families that need them the most. One thing I was going to mention in the, New America talks a lot in their paper about outreach and referring to the earned income tax credit outreach that's been historically very successful and I think generally recognized as such. And how that deals with this issue that you mentioned it came up at finance this morning of colleges and guidance counselors not wanting to talk about these tax credits because they don't want to give tax advice. This is just, this is a non-issue when we've looked at the EITC. And it's interesting that in this environment, this is something that really worries people a great deal. But when we're doing these other kinds of outreach, people say there are tax credits out there, we wanna make sure that people know about them, that they know how to claim them. I think that's equally applicable to this environment as well. What's the difference between these two environments that could allow that outreach to maybe be more possible or for people to be less nervous about it than they are now? Just do it. All right. Thank you. Did you want to? Well, I thought, you know, you wrote the paper on the EITC outreach so I thought maybe you could. Again, it's interesting and I think to some extent it's because that there are some higher income families who qualify for these tax credits. And so people tend to think of those families as requiring tax advice. And so we don't want to be getting into that area. And we think of low income families and we think, well, I don't know, we don't need tax advice. You know, I think all families need help understanding the tax code. It's incredibly complex. Knowing how to go about figuring out what are the best provisions for you. Knowing really also what you need to do in terms of behavior to take the fullest advantage of these. And we offer these tax credits as an incentive and people need to be aware of that incentive to be able to make the behaviors that we hope for. One thing I would add on the outreach side that I think could bode well in this case in terms of outreach on education tax credits is that the entire eligible population, I mean less so now with online programs, but most of the eligible population you can find in a particular place at a particular time, which is not true of EITC. So if we've had that much success with a much more dispersed population, presumably if we get this right, we can have significant amount of success in the education tax benefit space. Now, certainly we have challenges with counseling and things like that and student loan counseling that we all know well. So that's certainly no guarantee, but I think a big opportunity out there. Yeah, I would say that besides we talked about wanting to have colleges be more aggressive, but we also want to see the education department do more. We want to see them put AOTC on FAFSA on the web and in the student aid report, which is a document students receive once their FAFSA has been processed. We want to see the IRS make sure that at their free tax preparation sites that they support, that they alert low income students about the AOTC, we think the TRIO and GEARUP programs could do a great job at letting the students that they serve know about the AOTC and how to claim it. It's another question from the second row, yeah. Hi, I'm Aksana, I'm here with Wiser and there's been a little bit of discussion about getting the college guidance counselors to talk more about these tax options. Has there been discussion about the high school guidance counselors? Like is there a solution when you look back to the high school because I know I can get information at my college, but in high school it was really hard for me to get. I mean, I could go in and make an appointment and they'd be like, here's a website, go look at it. They'd be like, okay, thanks. So I'm wondering if there's, if you've talked about other solutions going back to the high schoolers or anything along those lines. I mean, I think what we do find is that high school guidance counselors tend not to be so great at any financial aid in general that they tend to be very overwhelmed, especially at schools that low income students attend. In fact, there are a lot of reports about how they're not able to, at some of these lower income schools, they're not even able to advise them on colleges that they're more, you know, that they are sort of overwhelmed by the amount of sort of disciplinary stuff that they do. So it would be great, you know, if high school counselors, we would obviously love that if high school counselors were telling students and their families about the tax credits. I would add for, I mean, nationally I think there's about 450 students per high school counselor and the recommended level's something like 250 to one counselor, so certainly overwhelmed. Young Invincibles have done some research in this area and one thing that we found is that often counselors will report in surveys that they don't necessarily get training in their master's program, for example, on financial aid and a little bit less on the college process. A lot of it focuses on social work and particularly on disciplinary problems, which for counselors who are stressed and we've done some focus groups with them in some of these schools where they have many more students that can possibly take it and they can possibly help, that's where they end up spending a lot of their time. So it's partly a research question and partly a lot of the counselors themselves do want more training on the financial aid process generally. Well, I want to thank our panel for their very interesting papers, including ones about taxis and bonds. I'm, all of you should read all of them. I have, they're great. Thank you so much for your time and your expertise. Thank you. Thank you. Thank you. Thank you. Thank you.