[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Senate]
[Pages S9584-S9585]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BIDEN:
  S. 2035. A bill to invest in the future American work force and to 
ensure that all Americans have access to higher education by providing 
tax relief for investment in a college education and by encouraging 
savings for college costs, and for other purposes; to the Committee on 
Finance.


                           the get ahead act

  Mr. BIDEN. Mr. President, I have spoken in the Senate before about 
how the rising cost of a college education is putting a higher 
education--the American dream--out of reach for many middle-class 
American families.
  When I went to college, middle-class families could pay for the 
public college tuition and fees of their children for less than 5 
percent of their income. It stayed that way until 1980. Since then, 
however, college costs have skyrocketed and middle-class incomes have 
stagnated. The result is that today it takes almost 9 percent of the 
average family's income to send one--just one--child to a public 
college. And, if you go to a private college or university, tuition and 
fees will eat up 35 percent of your income.
  Who can afford that? Not many middle-class families that I know. Many 
young people today must choose between going heavily into debt or not 
going to college at all. And, as the debt burden gets heavier and 
heavier, more and more middle-class kids will not even have that 
choice. They simply will not be able to go to college.
  And, this is happening at a time when we as a Nation can least afford 
it.
  Educating our work force is one of the best investments we as a 
society can make, and it is one of the best measurements of future 
economic well-being. According to one study, a more educated population 
has been responsible for nearly one-third of America's economic growth 
since the Great Depression. As we prepare to enter the 21st century and 
as the world economy is increasingly internationally competitive, we 
must ensure that no American is denied a higher education solely 
because of the cost.
  In fact, this has been a goal of the Federal Government for over a 
century. From the establishment of the land-grant university system in 
the late 1800's to the GI bill at the end of World War II to the 
creation of the Pell Grant and Guaranteed Student Loan Programs in the 
1960's, the Federal Government has been committed to seeing a college 
education within reach of every American. It is time to renew that 
commitment.
  So, today, Mr. President, I am introducing comprehensive legislation 
to make college more affordable for American families, so that middle-
class parents can afford to send their kids to college and middle-class 
kids can afford to go.
  My bill, titled ``Growing the Economy for Tomorrow: Assuring Higher 
Education is Affordable and Dependable''--Get Ahead, for short--
combines numerous proposals to give tax cuts for the cost of college, 
to encourage families to save for a college education, and to award 
college scholarships to high school students in the top of their class 
academically.
  For the sake of time, Mr. President, I will not go through all of 
specific proposals now. Instead, I refer my colleagues to a summary of 
the legislation.
  Mr. President, a college education is the dream of every American 
family. When I travel around my State of Delaware, I meet with wealthy 
businessmen, poor welfare mothers, and hundreds of middle-class 
families. And, they all want the same thing for their kids: a chance to 
go to college.
  They do not need us in Washington to tell them it is becoming harder 
and harder to get there. They know that. They need us to make it easier 
for them. I urge my colleagues to cosponsor this important legislation 
to make sure that the American dream of a college education remains 
within reach of every American.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                       The GET AHEAD Act--Summary


              title i--tax incentives for higher education

           Subtitle A--Tax Relief for Higher Education Costs

     Section 101--Deduction for Higher Education Expenses
       An above-the-line tax deduction (available even to those 
     who do not itemize deductions) would be allowed for the costs 
     of college tuition and fees as well as interest on college 
     loans.
       In the case of tuition costs, beginning in tax year 1999, 
     the maximum annual deduction would be $10,000 per year; a 
     maximum deduction of $5,000 would be available in tax years 
     1996, 1997, and 1998. The full deduction

[[Page S9585]]

     would be available to single taxpayers with incomes under 
     $70,000 and married couples with incomes under $100,000; a 
     reduced (phased-out) deduction would be available to those 
     with incomes up to $90,000 (singles) and $120,000 (couples). 
     The income thresholds would be indexed annually for 
     inflation.
       Interest on student loans would be deductible beginning 
     with interest payments made in tax year 1996. Interest 
     payments could be deducted on top of the $10,000 deduction 
     for payment of college tuition and fees. There would be no 
     annual maximum and no income limits with regard to the 
     deductibility of interest on student loans.
       Language is included to coordinate this tax deduction with 
     other education provisions of the tax code--to ensure that 
     individuals do not receive a double benefit for the same 
     payments. Specifically, qualified higher education expenses 
     that could be tax deductible would be reduced by any payments 
     made from Series EE savings bonds (and excluded from taxable 
     income), any veterans educational assistance provided by the 
     federal government, and any other payments from tax-exempt 
     sources (e.g. employer-provided educational assistance). 
     Also, tax-free scholarships and tax-excluded funds from 
     Education Savings Accounts (see section 112) would first be 
     attributed to room and board costs; the remainder, if any, 
     would count against tuition and fees and would reduce the 
     amount that would be tax deductible. However, if tuition and 
     fees still exceeded $10,000 even after the reductions, the 
     full tax deduction would be available.
     Section 102--Exclusion for Scholarships and Fellowships
       College scholarships and fellowship grants would not be 
     considered income for the purposes of federal income taxes. 
     This returns the tax treatment of scholarships and 
     fellowships to their treatment prior to the 1986 Tax Reform 
     Act (which limited the exclusion of scholarships and 
     fellowships to that used for tuition and fees).
       Scholarships and fellowship grants would be fully 
     excludable for degree candidates. In the case of non-degree 
     candidates, individuals would be eligible for a lifetime 
     exclusion of $10,800--$300 per month for a maximum 36 months.
       Language is included to clarify that federal grants for 
     higher education that are conditioned on future service (such 
     as National Health Service Corps grants for medical students) 
     would still be eligible for tax exclusion.
       This section would be effective beginning with scholarships 
     and fellowship grants used in tax year 1996.
     Section 103--Permanent Exclusion for Educational Assistance
       The tax exclusion for employer-provided educational 
     assistance would be reinstated retroactively to January 1, 
     1995. And, the tax exclusion would be made a permanent part 
     of the tax code.

       Subtitle B--Encouraging Savings for Higher Education Costs

     Section 111--IRA Distributions Used Without Penalty for 
         Higher Education Expenses
       Funds could be withdrawn from Individual Retirement 
     Accounts (IRAs) before age 59\1/2\ without being subject to 
     the 10 percent penalty tax if the funds were used for higher 
     education tuition and fees. (However, withdrawn funds, if 
     deductible when contributed to the IRA, would be considered 
     gross income for the purposes of federal income taxes.)
       This section would be effective upon enactment.
     Section 112--Education Savings Accounts
       This section would create IRA-like accounts--known as 
     Education Savings Accounts (ESA's)--for the purpose of 
     encouraging savings for a college education.
       Each year, a family could invest up to $2000 per child 
     under the age of 19 in an ESA. For single taxpayers with 
     incomes under $70,000 (phased out up to $90,000) and married 
     couples with incomes under $100,000 (phased out up to 
     $120,000), the contributions would be tax deductible. (These 
     income thresholds would be indexed annually for inflation.) 
     For all taxpayers, the interest in an ESA would accumulate 
     tax free; the contributions would not be subject to the 
     federal gift tax; and, the balance in an ESA would not be 
     treated as an asset or income for the purposes of determining 
     eligibility for federal means-tested programs.
       ESA funds could be withdrawn to meet the higher education 
     expenses--tuition, fees, books, supplies, equipment, and room 
     and board--of the beneficiary. Funds withdrawn for other 
     purposes would be subject to a 10 percent penalty tax and 
     would be considered income for the purposes of federal income 
     taxes (to the extent that the funds were tax deductible when 
     contributed). The penalty tax would not apply in cases of 
     death or disability of the beneficiary of the ESA and in 
     cases of unemployment of the contributors.
       In addition, when the beneficiary of the account turns age 
     30 and is not enrolled in college at least half time, any 
     funds remaining in the ESA would be (1) transferred to 
     another ESA; (2) donated to an educational institution; or 
     (3) refunded to the contributors. In the first two cases, 
     there would be no penalty tax and the money would not be 
     considered taxable income. In the third case, the penalty tax 
     would not apply, but the funds would be counted as income to 
     the extent that the funds were tax deductible when 
     contributed.
       Finally, parents could roll over funds from one child's ESA 
     to another child's ESA without regard to any taxes, without 
     regard to the $2000 annual maximum contribution to an ESA, 
     and without regard to the age 30 requirement noted above. 
     Funds rolled over would also not be subject to the federal 
     gift tax.
       Language is also included to allow individuals to designate 
     contributions to an ESA as nondeductible even if such 
     contributions could be tax deductible. This gives families 
     the option to build up the principal in an ESA while at a 
     lower tax rate, rather than having to pay taxes on unspent 
     ESA funds when the contributors are older and likely in a 
     higher tax bracket.
       Tax deductible contributions to ESAs would be allowed 
     beginning in tax year 1996.
     Section 113--Increase in Income Limits for Savings Bond 
         Exclusion
       For taxpayers with incomes below certain thresholds, the 
     interest earned on Series EE U.S. Savings Bonds are not 
     considered taxable income if the withdrawn funds are used to 
     pay for higher education tuition and fees. This section 
     increases the income thresholds to allow more Americans to 
     use the Series EE Savings Bonds for education expenses.
       Effective with tax year 1996, the income thresholds would 
     be the same as the income thresholds for the higher education 
     tax deduction (see section 101): $70,000 for single taxpayers 
     (phased out up to $90,000), and $100,000 for couples (phased 
     out up to $120,000). As with the higher education tax 
     deduction, these income thresholds would be indexed annually 
     for inflation.
     Section 114--Tax Treatment of State Prepaid Tuition Plans
       Several states have established prepaid tuition plans, 
     where individuals can make advance payments for college 
     tuition. However, because of the uncertainty of federal tax 
     law, some states have put their plans on hold and other 
     states have not gone forward at all. This section clarifies 
     federal tax law in two respects.
       First, state-established trusts or corporations created 
     exclusively for managing tuition prepayment plans would be 
     exempt from federal taxes on investment earnings. Second, 
     the letter-ruling issued by the IRS to Michigan would be 
     codified: purchasers and beneficiaries of prepaid tuition 
     plans would be liable for federal income taxes on the 
     increased value of the investment only at the time the 
     funds were redeemed, not each year as the ``interest'' 
     accrued.
       To be eligible for the tax clarification, a state prepaid 
     tuition plan must guarantee at the time of purchase that a 
     certain percentage of costs would be covered at a 
     participating educational institution, regardless of the 
     performance of the investment fund. And, it must guarantee 
     that funds would be refunded in the event of the death or 
     disability of the beneficiary or in the event the beneficiary 
     failed to enroll in a participating institution.


            title ii--scholarships for academic achievement

       Beginning with the high school graduating class of 1997, 
     the top 5 percent of graduating seniors at each high school 
     in the United States would be eligible for a $1000 merit 
     scholarship. If an individual receiving such a scholarship 
     achieved a 3.0 (``B'') average during his or her first year 
     of college, a second $1000 scholarship would be awarded.
       However, the merit scholarships would be available only to 
     those students in families with income under $70,000 (single) 
     and $100,000 (couples). These income thresholds would be 
     increased annually for inflation.
       Funds are authorized (and subject to annual appropriations) 
     for five years. The first year authorization (fiscal year 
     1997) is $130 million. In each of the next four years (FY 
     1998-FY 2001), because the scholarships could be renewed for 
     a second year, the authorization is $260 million per year. 
     Total five-year authorization: $1.17 billion.


                     title iii--deficit neutrality

       To ensure that the ``GET AHEAD'' Act does not increase the 
     deficit, this title declares it the sense of the Senate that 
     the costs of the bill should be paid by closing corporate tax 
     loopholes.
                                 ______