February 3, 2010
by Agnes Jasinski
Whether you're an independent filing your own taxes, or a dependent whose parents or guardians are covering a good portion of your tuition, it's a good idea to be aware of the tax credits and tax benefits you and your family members could be eligible for this filing season.
The federal government has estimated that up to 2 million tuition-paying Americans will receive as much as $2,500 back on their taxes when they file in both 2010 and 2011 by taking advantage of the American Opportunity Tax Credit. That credit was established through the American Recovery and Reinvestment Act. The American Opportunity Tax Credit, which can be claimed for tuition and certain fees you pay for higher education in 2009 and 2010, is targeted at low- and middle-income families, and isn't available to single filers earning more than $90,000 a year or couples earning more than $180,000. Even those who owe no taxes due to how little they make may receive refunds of up to $1,000.
The American Opportunity Tax Credit expanded (and renamed) the already existing Hope Credit. How did the two compare?
Other important facts before you file for an American Opportunity Tax Credit:
Make sure you and your family are prepared this tax season, because the federal government does offer perks to going to - and paying for - higher education.
February 13, 2009
The House of Representatives just passed the compromise version of the economic stimulus package. Now there are just two stop left for it before it becomes law: the Senate and President Obama's desk. The Senate plans to vote later this evening, putting it on track to be signed on Monday.
As the dust settles, more detailed accounts of what's actually in the bill are emerging. While the final totals have not yet been made public, Inside Higher Ed has an updated version of their stimulus chart online today, featuring many of the stimulus provisions related to higher education. The $787 billion stimulus package will include:
February 27, 2009
Details of President Obama's proposed 2010 budget are emerging, with education being one of the first sections unveiled. In the budget proposal are increases and structural changes to Federal Pell Grants, changes to Federal Perkins Loans, and the potential elimination of the Federal Family Education Loan Program, so that all new Stafford Loans and PLUS Loans for 2010-2011 would be originated by the federal Direct Loans program. The president's budget also recommends that the new $2500 American Opportunity Tax Credit be made permanent, and that $2.5 billion be devoted over the next five years to programs to increase college access and completion.
After remaining nearly stagnant between 2002 and 2007, the maximum award for the Federal Pell Grant has increased significantly over the last few years. It shot up from $4050 in 2006-2007 to $4310 in 2007-2008, then $4731 in 2008-2009 and now stands at $5350 for 2009-2010. If this provision in President Obama's 2010 budget is adopted by Congress, the maximum Pell Grant will be set at $5500 for 2010-2011, and from there on out, it will increase in step with the consumer price index, plus 1%. This award amount would become mandatory, as well, saving Pell funding from being at the whim of Congress. This is good news across the board for now, but may be a problem later, since tuition and fees have steadily outpaced inflation for most of recent memory and it is entirely possible that they will soon leave the Pell Grant in the dust, despite this new funding commitment.
While the president's plans for Pell Grants and tax credits have largely been met with enthusiasm, the proposed changes to student loans have received mixed reactions. Changes to Perkins Loans would be good for some schools and students and bad for others, but would increase access to the loans overall. The move from FFELP to Direct Loans also has its ups and downs.
Channeling all Stafford Loans and PLUS Loans through Direct Loans would save money and streamline the process, and it may even reduce confusion about federal versus private loans, since students would no longer be borrowing both from the same bank. However, some worry that despite the extent to which incentives have already disappeared and the FFEL program has been subsisting off temporary goverment support for the past two years, abolishing it entirely may hurt students in the long run. Moving to a single lender system would eliminate what little competition in the student loan market remained, doing away with the possibility of future repayment or loan consolidation incentives. Others worry that some of the counseling and support that FFELP funding provided to borrowers would disappear, though a new $2.5 billion grant program would likely supplement these programs.
February 12, 2009
The Senate passed their version of the economic stimulus bill Tuesday, and by late afternoon yesterday it was announced that a compromise had been reached between the House and the Senate. The compromise bill includes less funding than either version--$789 billion as compared to $820 or $838 billion, and one of the areas that faced cuts was education.
While the final draft of the stimulus bill has not been released--or necessarily written--yet, some details are emerging in media coverage. It appears that a Pell Grant increase has made it into the final draft, though the exact amount is still unknown. Federal Work-Study also receives a funding boost, though it's also unclear whether it's the full $490 million appropriated by the House. The $2,500 tuition tax credit has also survived, as have several other tax credits not related to education. Proposed increases to Perkins Loans and unsubsidized Stafford Loans appear to have been axed from the conference committee's version of the bill. States will receive some money to offset educational expenses and aid in school construction and renovation, though not as much as the House had appropriated.
More details will likely emerge over the next couple days as the bill makes its way back through the House and Senate for final approval. The stimulus package could be signed by President Obama as soon as Monday. While the stimulus will provide some help to most people attending college, it's not too late to find other ways to boost the funding to your own college education. Conduct a free college scholarship search to see what financial aid is out there.
March 3, 2009
With all the talk about spending and stimulus legislation and bailouts, it can be easy to lose track of what benefits taxpayers can actually expect to receive. Most likely, everyone knows that the American Recovery and Reinvestment Act, perhaps better known as “the stimulus,” will create jobs through funding “shovel-ready” projects and will put a little extra in paychecks through a tax rebate that will take effect this summer. You probably also know that there’s also financial aid in there for education, but you may not be sure exactly what.
Frankly, so much federal legislation and talk of change has been floating around in the last two years that anyone who last paid a tuition bill as recently as 2007 probably doesn’t even recognize financial aid in 2009. To help, we’ve prepared a breakdown of where student financial aid stands currently.
Pell Grants. The American Recovery and Reinvestment Act increased the maximum Federal Pell Grant award from $4,731 for 2008-2009 to $5,350 for 2009-2010. The maximum Pell award will go up again in 2010-2011 to $5,500 under this legislation.
The income threshold to qualify for federal grant programs also increased. Now students with an expected family contribution (a number determined by completing the FAFSA) of up to $4,671 (up from $4,041 this year) can qualify for Pell grants. They will not receive the whole award, but even the minimum award has increased—from $400 for full-time students in 2007-2008 to $976 for the same group in 2009-2010, due in part to the College Cost Reduction and Access Act, which increased all Pell awards by $490.
Students qualifying for Federal Pell Grants can also pick up additional college funding through Academic Competitiveness Grants or SMART grants, which include Pell eligibility in their criteria. Many non-federal college scholarships and grants also use Pell eligibility to determine awards, so the newly Pell-eligible will definitely want to do a scholarship search to see what’s out there.
Work-Study. More students will also see “federal work-study” on their financial aid award letter in 2009-2010 thanks to the economic stimulus legislation. More money is available to work-study programs that allow students to get a part-time job on (or occasionally off) campus and count the income as financial aid. Work-study programs provide great job opportunities for student workers, and since the money is given in the form of a paycheck, students can use these funds to pay their tuition bills or to cover living expenses.
Tax Benefits. One of the biggest perks of the American Recovery and Reinvestment Act is the creation of the American Opportunity Tax Credit, which replaces the Hope Credit. The tax benefits under Hope only went up to $1,800 and only could be taken for two years. The American Opportunity Tax Credit can be used for four years, can fund up to $2,500 of college costs (100% of the first $2,000 plus 25% of the next $2,000, for a total of $2,500), and up to 40% is refundable, so people who don’t pay as much in taxes as they would qualify to receive in the credit can still get something.
Additionally, the income level at which the American Opportunity Tax Credit phases out is higher than the Hope credit, allowing individuals with incomes of up to $90,000 and married couples with incomes of up to $180,000 to take it.
Families will be able to start taking advantage of the American Opportunity Tax Credit on their 2009 taxes.
Other Benefits. Much more is included in the American Recovery and Reinvestment Act. For example, students with 529 savings plans can now use that money to purchase a computer for school. Additionally, states will receive billions of dollars over the next two years, with a portion of the money devoted specifically to funding projects at public institutions of higher education, as well preventing or reversing massive reductions in state education spending.
While student loans stayed the same in the stimulus, they did receive a boost in the fall through the continuation of the Ensuring Continued Access to Student Loans Act, as well as other recent legislation, including some new aid to lenders.
If you’d like to read more about how recent legislation has affected paying for college, our blog archives feature breakdowns of the 2007 College Cost Reduction Act, the 2008 Higher Education Opportunity Act, the 2008 Ensuring Continued Access to Student Loans Act, the 2008 GI Bill, and more examples of what's going on with college in Congress.
February 25, 2009
In a speech delivered before a joint session of Congress, President Obama called for every American to complete at least one year of postsecondary education and pledged greater financial support for those attending college. He also urged that America become the "best educated" nation and set the goal of having the highest proportion of college graduates in the world by 2020.
In addition to healthcare and alternative energy, the president declared education to be a top priority for improving America's economy and its place in the world. He called on families, schools, and Congress to embrace this priority, and to better prepare citizens for careers that increasingly require some amount of education or training beyond high school.
President Obama promised greater funding for higher education in the federal budget for 2010. This may include the educational tax benefits he advocated in his campaign, as well as other increases to federal student financial aid. He once again mentioned community service or other national service as requirements for future financial aid.
In addition to pledging greater state support, he also asked for an individual commitment by each American to not only graduate from high school, but to set college goals and attend a college, university, community college, or vocational training program for at least one year. In addition to helping people succeed individually, greater education and training can lead to greater success for society.
Obviously, problems with paying for school will not disappear overnight. But with help from schools and the government, individuals who work hard and make higher education a priority can reap the benefits, despite the challenges that remain.
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