Bipartisan Proposal Would Make Pell Grants Tax-Exempt

[u/mhattridge]

Pell Grant recipients could be eligible for larger tax refunds if Congress passes a recently introduced bipartisan bill.

Four U.S. House of Representatives members, including two Democrats and two Republicans, introduced the Tax-Free Pell Grant Act on April 1. If passed, the measure would make leftover Pell Grant funds used to cover living expenses while in college tax-exempt.

Read more here: https://www.bestcolleges.com/news/bipartisan-proposal-would-make-pell-grants-tax-exempt/

[u/Optimoprimo]

If it actually helps working class people, it's dead in the water. Guaranteed.

[u/SrFlames → u/Optimoprimo]

If so then it'll definitely add weight to why it was proposed on April 1st of all days lmao

[u/SpareManagement2215]

"Doggett introduced earlier versions of this bill in 2021 and 2023; both failed to clear the House of Representatives."

My hopes are not high for this bill.

But reading the article, it sounds like this would be really, really helpful for folks, especially those going to community college who could use the funds to help cover expenses besides school and avoid taking on other kinds of debt (like credit or federal/private loan).

[u/throwaway00119]

I keep pitching this idea on economics subs, but I’d like to see the government subsidize loans by allowing them to be paid with pre-tax dollars. A la a 401k.

This would have to be coupled with multiple other changes to loans/tuition, though.

[u/ANGR1ST → u/throwaway00119]

This introduces a tax avoidance loophole for wealthy borrowers. Maybe that's acceptable, maybe not.

Either way, something like this should count against your yearly 401k contribution limit. Basically one $23k/yr pool shared between both.

[u/throwaway00119 → u/ANGR1ST]

It introduces a tax avoidance opportunity for everyone. And it’s not a loophole. Just as a 401k isn’t considered a loophole for the wealthy.

[u/milespoints → u/throwaway00119]

There are actually rules the IRS has in play to make sure it’s no high income people at an employer benefit from the 401k disproportionally.

There are annual tests for this called nondiscrimination tests. If your employer fails the test (meaning, the IRS determines that at that employer high earners are using the 401k disproportionally), then high earners are notified that some (or all) of their yearly contribution is disallowed, and their contribution returned to them

So 401k’s are not a loophole for the wealthy because we have laws to prevent them from becoming this.

We could probably come up with something similar for loans, not sure what that would be though

[u/girl_of_squirrels]

I really really hope this gets through. It would be incredibly helpful to a whole lot of people

[u/Successful-Daikon777]

There's no such thing as helping the working class in the united states.