Kirk, Bipartisan Group of Senators Introduce Bill to Protect Work College Scholarships

Press Release

-- U.S. Senator Mark Kirk (R-Ill.) today, along with Senators Dick Durbin (D-Ill.), Roy Blunt (R-Mo.), John Boozman (R-Ark.) and Patrick Leahy (D-Vt.) introduced S. 376, The Work Colleges Relief Act, which would clarify and make permanent a tax exemption for Work College scholarships that would help schools and their students avoid unnecessary legal and accounting costs. In 2011, Blackburn College in Carlinville, Ill., was audited because of the confusing tax code provision, costing the school $25,000 in legal fees, staff time and resources that could have gone to student scholarships instead.

"Blackburn College offers a valuable work college education to 550 students in Illinois, and is one of the most affordable colleges in the state," Senator Kirk said. "The scholarships offered are vital to keeping students' costs down, and by making this tax exemption permanent we can help schools and their students avoid burdensome fees."

"This bipartisan bill is a commonsense clarification to our tax code that will save work colleges -- like Illinois' Blackburn College -- time and resources that would be better spent on their hardworking students than on costly tax audits," Senator Durbin said.

"Work colleges like the College of the Ozarks in Southwest Missouri help decrease student debt and reliance on loans, while providing students with real work experience," Senator Blunt said. "I'm pleased to join Senator Kirk and my colleagues in introducing this bipartisan bill so that we can remove the unnecessary burden on work colleges across the country and help students afford a valuable, quality education."

"Work Colleges are a commonsense approach to providing higher education while reducing the cost of college for students. Arkansas's Ecclesia College offers students an opportunity to earn a four-year-degree while gaining real world experience to be successful in the workforce. We need to take the necessary steps to protect these colleges and ensure their students continue to get the scholarships they work for and need to pay for school," Senator Boozman said.

"Work colleges offer students the opportunity to earn college degrees while giving back to their schools and their communities with real-world work experience. In Vermont, Sterling College's focus on the environment and sustainability has made a lasting impact on the graduates and the communities they serve. It is a model that not only gives students experience through work, but also helps keep their college costs down, because earnings go directly toward tuition. These students and these colleges deserve to have the certainty that this bill offers," Senator Leahy said.

In 1986, the Tax Reform Act erroneously eliminated a specific tax protection for scholarships awarded by Work Colleges. While the IRS has continued to exempt these scholarships from taxation, because of the confusion in the tax code, Work Colleges face costly audits over the tax treatment of scholarships, and there is no guarantee the exemption will continue to be honored in the future. The Work Colleges Relief Act would amend Section 117(c)(2) of the tax code to make the exemption permanent, and would treat credits and payments as scholarship aid instead of wages.

Currently, there are seven Work Colleges nationwide -- in Kentucky, Illinois, Missouri, Arkansas, Vermont and North Carolina. These schools, authorized by the Higher Education Act, are private institutions at which work is an integrated and required component of educational programs, and whose enrollments range around 300-1,600 students per year. Altogether, our nation's Work Colleges provide educational opportunities to more than 5,000 students every year.