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Help us make the Segal AmeriCorps Education Award TAX FREE
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Were you negatively impacted by the federal tax on your AmeriCorps Education Award?

The original vision for AmeriCorps was simple: invite young Americans to roll up their sleeves and engage in intensive national service opportunities to support local communities.  And in exchange, provide those who complete a term of service with an education scholarship that can make higher education more affordable.  

Today, every AmeriCorps member who completes a term of service receives a Segal AmeriCorps education award that may be used to pursue a future degree or to pay back existing, qualified student loans.  But that award is treated differently that many similarly purposed federal fellowship and scholarship programs - including Pell Grants, the GI Bill Benefit, and the National Health Service Corps. The AmeriCorps education award is subject to federal taxation after it is used.

The tax on the AmeriCorps education awards has significant practical implications.  Because the award is sent directly to the institution of higher education or to the student loan lender, AmeriCorps alumni are not able to use a portion of the award to pay the resulting tax.  This creates an unexpected tax burden on the dedicated Americans who commit to serving the country through AmeriCorps.  It’s essentially a tax on service. 

Voices for National Service - an advocacy coalition housed at City Year - is working on legislation to make the education award tax-free.  To help make the case for this tax relief, Voices is looking for stories from AmeriCorps alumni who have endured a hardship as a result of the tax on the education award. 

Do you have a story to tell?  Did the federal tax on the AmeriCorps education award affect your life, finances, and/or career and education plans?

If yes - please send an email to Jennifer Ney, City Year's Vice President of Public Policy, at 
jney@cityyear.org.

Over the years, Voices for National Service has been collecting stories from alumni impacted by the tax. Some share that the financial burden of the tax discouraged them from using the award.  Others delayed or changed their educational goals.  Read a few of these stories below, and let us know if you have a story to add. Thanks! 

From Roberta in Montana
While working for AmeriCorps for what amounted to about $3.50 an hour in stipends, digging hiking trails in Montana, we often consoled ourselves that at least we got an education award at the end of the season.  I received approximately $7000 in [Segal AmeriCorps] Education Awards for my two service terms. My education award went towards paying off a chunk of preexisting school loan debt.  What I didn't realize was to what degree this award would be taxed.  I had been planning on returning to school following AmeriCorps, so I got a slightly better paying job to start saving up for it.  When the tax season came around, I expected I would get money back, but instead I had to pay $1,000 because of the education award.  This unanticipated tax obligation cut into my savings for my further schooling.  What's frustrating is that it ultimately feels like we are being fined for using our own award.  Because the full value of the award must go toward schooling or debt and it goes directly from the Federal government to the lender or educational institution, AmeriCorps members can’t set aside a portion to help pay off the taxes.  Like many who participate in AmeriCorps, I did not earn much during my service term.   After I was finished, I wanted to go back to school to improve my workforce readiness.   It seems ridiculous that I should bear such a heavy tax burden for something that is intended as a reward for serving my country.

From Tammy in Michigan
I served two terms in AmeriCorps and I did not use my education award.  I couldn't afford the tax, so I let it go back to the Federal government unspent.  If it had not been taxed, I would have used the award to further my education, skills, and abilities.  


From Kelly in New York
I was a single mother, struggling unsuccessfully to pay off an old student loan, when I joined AmeriCorps.   I earned two Segal AmeriCorps Education Awards and they helped me to pay off that nagging debt.  During the same year that I applied my awards to my outstanding loan, I got married.   The agency where I did my AmeriCorps service hired me full-time.  Due to these changes in my life and my financial status, I moved into a new tax bracket and ended up owing an additional $1,500 in taxes.  I didn’t realize the impact my education awards would have on my taxes or that I would owe such a large sum.

 

Yours in Service, 

Jennifer Ney
Managing Director, Voices for National Service
Vice President of Public Policy, City Year, Inc.
1875 Connecticut Avenue, NW | Suite 400 | Washington, DC 20009
t. 202.742.7380 | c. 202.340.1331
jney@cityyear.org


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