May 08, 2025

Wyden Joins Bipartisan Tax-Free Pell Grant Act to Help Make Higher Education More Accessible and Affordable

Legislation would simplify access to higher education assistance and increase opportunities for students in Oregon and nationwide.

Washington, D.C. — U.S. Senator Ron Wyden, D-Ore., today joined Senate colleagues in introducing bipartisan legislation that would simplify higher education assistance for students in Oregon and nationwide by better coordinating Pell Grants with higher education tax incentives. 

While Pell Grants have been a critical federal aid tool helping millions of young people cover college tuition and other fees, any additional education costs like living expenses are taxed. 

The current tax code is complex and lacks coordination between the American Opportunity Tax Credit and the Pell Grant program, preventing students from maximizing their benefits. Students are required to subtract their Pell Grant from the amount of expenses for which they claim the tax credit that provides up to $2,500 for tuition and course materials. But 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 tax credit all together.

“Students seeking a higher education should never be denied opportunities because they can’t afford it,” Wyden said. “For decades, Pell Grants have been supporting Oregonians who are pursuing a higher education in hopes of achieving a better and brighter future. This bipartisan legislation will help students worry less about the tax consequences of their financial aid and more about the educational tools they need to succeed.”

The Tax-Free Pell Grant Act would also remove financial barriers to higher education by  fully excluding Pell Grants from taxable income, and ensuring that students do not have to subtract Pell Grants from expenses for which the tax credit can be claimed.

In addition to Wyden, the bill was led by U.S. Senators Sheldon Whitehouse, D-R.I., and Chuck Grassley, R-Iowa, and cosponsored by U.S. Senator Thom Tillis, R-N.C.

The text of the bill is here.