Published: December 2022

Groups urge end to taxation of Pell Grant funds

Consumer Action was among 27 organizations urging Congressional leaders to adopt the bipartisan Tax-Free Pell Grant Act, which would end taxation of Federal Pell Grant funds. Doing so would make higher education more affordable and simplify the tax code for students and families with low and middle incomes. As you assemble a year-end tax relief package, we request that Congress adopt the bipartisan Tax-Free Pell Grant Act.

Consumer Action was among 27 organizations urging Congressional leaders to adopt the bipartisan Tax-Free Pell Grant Act, which would repeal the tax on Federal Pell Grant funds. The change would make higher education more affordable and also would simplify the tax code for low- and moderate-income students and families. Non-tuition higher education expenses now account for up to 80% of the cost of attending college, yet Pell Grant funds used for non-tuition college expense are taxable. Repealing the taxability of Pell Grants would permit grantees—among the students with the lowest incomes in higher education—to retain more of the critical financial aid they need to succeed and graduate. The change would also hundreds of thousands of low-income Pell Grant recipients access the American Opportunity Tax Credit (AOTC)—currently underutilized because of the Pell Grant taxability rules, which force many students to apply more of their Pell Grant to tuition, to avoid being taxed on the funds, thereby reducing the amount of education expenses they can claim toward the AOTC.

Lead Organization

The Hope Center for College, Community, and Justice

More Information

Read the letter here.

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