Expanded Credit Has Received Support From Senate Finance Committee and Incoming Administration—Could Be Included In Economic Stimulus Package; Credit Is New Approach & Major Change - For Every $1 Spent On College Tuition, Middle-Class Families Could Get $1 Off On Taxes, Up To $4,000 A Year – Better Than Present Deduction That Saves Families Only 15 Or 25 Cents On The Dollar; If Passed, Families Could Use the New Tax Credit of Up to $4,000 in Tuition and Textbook Costs for Each Student As Soon
WASHINGTON, DC—U.S. Senator Charles E. Schumer, joined by Senators Evan Bayh, Patty Murray, Joe Lieberman, Barbara Boxer, Sherrod Brown, and Bob Casey, today announced they will introduce a bill to quadruple the value of the current college tuition tax benefit and will push to pass it as part of the economic recovery package currently being assembled in Congress. The bill is a new approach and a major change to the current college tuition tax benefit. The new credit will save middle class families up to $4,000 on their taxes per student each year. Schumer said today there is a good chance that this credit could pass with the economic stimulus package, as it has received broad support from the Senate Finance Committee and the incoming Obama administration. If so, middle class families across the country could utilize the new tax credit as soon as this tax year for returns filed next year. The senators said the savings is needed now more than ever as the economic downturn takes its toll on middle-class families and tuition costs skyrocket.
“A college education is a necessity for America's children and it is being priced as a luxury item. This bill is a new approach that would provide middle class families with one dollar off their taxes for every dollar spent on college tuition,” said Schumer. “This bill could save middle-class families thousands of dollars. In tough economic times like these, this bill will offer families real relief.”
“Access to an affordable college education is a key component in preparing students for the job market of the future,” said Bayh. “Especially during challenging economic times, this important bill will not only simplify and expand access to higher education for students, but help alleviate the stresses on family budgets today.”
“There is nothing more important in tough economic times than ensuring access to higher education. We can’t fill the jobs of tomorrow without a educated, skilled and highly trained workforce,” Senator Murray said. “This bill will help middle-income Americans afford higher education even in challenging times.”
“Higher education is a critical investment in our children’s future that we cannot afford to shortchange,” said Lieberman. “This bill represents a new strategy to ease the burden that middle-income families bear on the path to success.”
“College costs have continued to climb rapidly, making college unaffordable for many families and saddling our students with debt for years,” Senator Boxer said. “This bill will help make college affordable for middle-class families so that more children can achieve their full potential and succeed based on their merits, not their wallets.”
“We need to make sure the economic downturn doesn’t keep students from going to college,” said Senator Brown. “This bill simplifies tax breaks for college students and increases the number of students who can use them. It’s critical that we make a college education more affordable and accessible for all Americans.”
“We must encourage students to invest in themselves, especially at a time of economic downturn,” said Senator Casey. “Recession and high college costs can discourage families who have bills to pay and needs that they must meet, but investments in education pay off for individuals and in the long run for the economy as a whole with more skilled, more productive workers.”
In the last decade, college tuition has skyrocketed across the country in light of rising costs. With the recent tightening in the student loan credit market, more students of all income levels are being forced into borrowing from both federal and private lenders to finance college and they are borrowing in higher amounts than ever before. Others are forced to make tough decisions about whether or not higher education is feasible. According to the federal Advisory Committee on Student Financial Assistance, cost factors prevent 48 percent of college-qualified high school graduates from attending a four-year institution and 22 percent from attending any college at all.
To provide real relief for middle class families saddled with skyrocketing tuition costs, the senators today announced that they are fighting to significantly increase the tax benefits provided by the current higher education tax incentives. The senators said the plan would quadruple the middle class tax benefit in many cases and save U.S. families thousands of dollars every year. They said that if it passed, the tax credit would take affect as soon as this tax year.
The bill introduced today would combine the HOPE and Lifetime Learning credits and the above-the-line tuition tax deduction into one credit of up to $4,000 per student. For middle class families currently taking the HOPE credit, making less than $60,000, the new credit would more than double the existing tax benefit. If these families currently use the college tuition deduction, the maximum tax benefit could be quadrupled or more, depending on a family’s circumstances and tuition costs. The tax credit would go into effect for tax year 2009 and help the millions of individuals that apply for higher education tax credits each year. The bill is written in such a way so that even students with modest tuition—such as those attending a community college—still receive a sizeable credit. The lifetime benefit per student is set at $16,000, and it can be used for college or graduate school. The new credit will also include expenses for tuition, fees, and textbooks and can be used for up to three students per household. Up to 50 percent of the cost of textbooks, up to $400, can be claimed as part of the $4,000 credit each year.
The college tuition tax credit bill works much better than existing tax incentives and would save families thousands more dollars every year. For example, a family making $60,000 this year would save $600 this year if they use the current tuition deduction, or $1800 if they use the HOPE credit. Under the new proposal, that family would see their entire federal tax liability disappear and they would save $3,265 for each student, every year. A family making $70,000 a year, with $8,000 in out of pocket tuition costs, would save the full $4,000 under Schumer’s new bill. Under the current incentives, they would likely save just $600 because they would not qualify for the HOPE credit at all.
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