Wyden bill aims to help make higher ed more affordable, exclude Pell Grants from taxable income

WASHINGTON (KTVZ) -- Sen. Ron Wyden, D-Ore., said Thursday that he and Senate colleagues have introduced legislation that would exclude Pell Grants from taxable income and make financial assistance more accessible to students pursuing higher education.

“Figuring out how to pay for college is hard enough without having to maneuver the inner workings of the U.S. tax code," Wyden said. "This legislation would ensure that students are able to take full advantage of the aid they're entitled to —which would go a long way to help make college more affordable for students in Oregon and nationwide." 

The Tax-Free Pell Grant Act would remove financial barriers to higher education by better coordinating Pell Grants with the American Opportunity Tax Credit and fully excluding Pell Grants from taxable income. 

Despite the success of the Pell Grant and American Opportunity Tax Credit, the current tax code and lack of coordination between the two programs prevent students from maximizing their benefits, the senator said.

Calculating the optimal amount of the Pell Grant to include in taxable income is complicated for those without access to sophisticated tax advice, so many students leave benefits on the table or forgo claiming the American Opportunity Tax Credit altogether. This issue primarily hurts students at lower-cost schools like community colleges.   

The legislation is led by Senators Sheldon Whitehouse, D-R.I., and Chuck Grassley R-Iowa, alongside Wyden.  

The text of the bill is here.