[Congressional Record Volume 143, Number 8 (Tuesday, January 28, 1997)]
[Senate]
[Pages S747-S749]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BIDEN:
  S. 218. 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, today I am reintroducing a 
comprehensive bill I first introduced last summer to make college more 
affordable for middle-class families. Formally titled the ``Growing the 
Economy for Tomorrow: Assuring Higher Education is Affordable and 
Dependable'' Act, it is known as the Get Ahead Act for short.
  This legislation contains numerous provisions--some of which have 
been or will be introduced by others as separate bills; other 
provisions are novel to this bill--but they all have one thing in

[[Page S748]]

common. They all are an attempt to renew our commitment to see that the 
American Dream of a college education remains within reach of all 
Americans.
  Because, the plain truth is, that dream is slipping out of reach for 
many middle-class families. When I was in college 30 some years ago, my 
parents could send me to a State university for less than 5 percent of 
their income. And, it stayed about that much--college costs went up 
each year by about the same amount that the average family's income 
went up--until 1980. And, then, college costs exploded. Since 1980, the 
cost of public college tuition and fees has increased nearly three 
times faster than the average family's income.
  We can debate endlessly the reasons why and who or what is to blame. 
But, all that middle-class families know is that the costs have 
skyrocketed, and they must constantly worry about how they will ever be 
able to afford to send their children to college.
  For a long time now, Members on both sides of the aisle have believed 
that the Federal Government has a role and responsibility in helping 
Americans get to college. Not to guarantee that everyone in America 
goes to college, but to guarantee that no one who qualifies for college 
is turned away just because they cannot afford it. It is important for 
individual Americans--and it is important for the future of America as 
a whole.
  But, I think it is legitimate to question that commitment today when 
costs are rising out of control; when we spend more on loans that have 
to be repaid and less on grants that do not; and when the tax law 
rewards investment in machines but not investment in people.
  It is time, Mr. President, to renew and reaffirm our commitment to 
higher education. And, so, I offer the Get Ahead Act, and I invite my 
colleagues to join me in this effort.
  Let me take just a few minutes to review what this bill would do. 
And, I ask that a much more detailed summary of the bill be included in 
the Record at the conclusion of my remarks.
  First, the Get Ahead Act provides direct tax relief for the costs of 
higher education. This is accomplished by creating a $10,000 tax 
deduction for college tuition and fees as well as the interest on 
student loans. We currently give tax breaks to businesses for 
investment in the future--in research and development and in the 
purchase of new plant and equipment. I support that. But, at the same 
time, we do not provide tax relief to middle-class families who invest 
in their own children's future through higher education. We should.

  In addition, under the Get Ahead Act, all scholarships, including 
that used for room and board, would be excluded from taxable income, as 
was the case prior to the 1986 Tax Reform Act.
  And, the tax exclusion for employer-provided educational assistance 
would be extended and made permanent. As my colleagues know, when an 
employer pays part or all of the costs of an employee's education, that 
does not have to be counted as income to the employee for tax purposes. 
Last year, we extended that provision through May 31, 1997. What my 
bill does is make it a permanent part of the Tax Code--so we do not 
have to keep coming back and extending it every year or so--and my bill 
ensures that the tax exclusion applies to both undergraduate and 
graduate education. Last year, unfortunately in my view, in extending 
the tax exclusion, we applied it only to undergraduate education.
  Second, Mr. President, the Get Ahead Act encourages people to save 
for the costs of higher education. Specifically, it would allow 
individuals to withdraw funds from their Individual Retirement Accounts 
for education expenses--without incurring a 10-percent penalty tax. 
Also, more Americans would be able to take advantage of Series EE 
Savings Bonds. These are the bonds where you do not have to pay tax on 
the interest if the money from the bonds is used to pay for college 
tuition.
  And, my bill would create Education Savings Accounts--accounts 
similar to IRA's. Each year, families could put tax free up to $2,000 
per child into an ESA for their children. That money would accumulate 
tax free--and you would never have to pay taxes on it if the money was 
used to pay for college.
  Finally, Mr. President, the Get Ahead Act would award merit 
scholarships to all students who graduate in the top 5 percent of their 
class. While the $1,000 scholarship would cover about two-thirds of the 
cost of a community college, I realize this is not a large sum of money 
for someone attending a 4-year institution, especially if it is a 
private college. But, it could make a difference for many students, and 
I believe that, regardless, it is important that we start to reward 
students who meet high academic standards.
  There is one provision not in the bill that was in last year's bill. 
Last year, I included a section clarifying the Federal tax treatment of 
State prepaid tuition plans. Similar provisions were enacted last year 
as part of the minimum wage bill, and therefore I did not need to 
include them in this year's bill.
  Mr. President, the Get Ahead Act is aimed at seeing that individual 
Americans have the opportunity to get ahead. In today's economy, in 
today's world, you need a college education to do it. And, for those 
who would criticize this proposal as a handout to the middle class, let 
them ponder what the future of America will be like if the vast masses 
of the middle class are denied a college education.
  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


 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 2000, 
     the maximum annual deduction would be $10,000 per year; a 
     maximum deduction of $5,000 would be available in tax years 
     1997, 1998, and 1999. The full deduction 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 1997. 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 1997.


      section 103--permanent exclusion for educational assistance

       As part of the minimum wage/small business tax relief bill 
     enacted in 1996, the tax exclusion for employer-provided 
     educational assistance was reinstated retroactively and 
     extended through May 31, 1997. But, as of July 1, 1996, the 
     tax exclusion only applies to educational assistance for 
     undergraduate education.

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       This section would extend the employer-provided educational 
     assistance tax exclusion by making it a permanent part of the 
     tax code. In addition, it would retroactively reinstate the 
     tax exclusion for graduate education.


  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 (ESAs)--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, parent 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 note 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 1997.


   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 1997, 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.


            title ii--scholarships for academic achievement

       Beginning with the high school graduating class of 1998, 
     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 
     1998) is $130 million. In each of the next four years (FY 
     1999-FY 2002), 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.
                                 ______