• Currently, federal tax credits for higher education are largely unavailable to low-income students and are also unavailable to many moderateincome students.
• This limitation substantially reduces the credits’ effectiveness in encouraging students who would not otherwise attend college to do so.
• Low-income students who do attend college frequently face high costs of attendance, even after taking into account governmental and
institutional aid. According to Department of Education statistics, 85 percent of undergraduates from families with incomes below
$20,000 had unmet financial need in 2003-2004 that averaged thousands of dollars per student.
• Making the higher education tax credits available to low- and moderate-income students would require making the credits refundable. About a third of all households, and almost half of families with children, have no federal income tax liability. Very few of these households can benefit in full from the current, nonrefundable tax credits, and many cannot benefit at all.