What is said to be the largest investment in education to date, President Barack Obama has introduced the American Recovery and Reinvestment Act (ARRA). It addresses key issues, including teacher layoffs, college affordability and educational improvements, according to the White House Web site.
College affordability has been a growing concern in recent years as its rising costs far outpace the inflation rate of both family income and the price of necessities, including medical care, food, housing and transportation.
In an effort to offset some of those costs, Obama aims to help students and families with a wide range of household incomes to make post secondary education more affordable, states the National Center for Higher Education.
The ARRA includes $30 billion dedicated solely to making post secondary education more affordable, according to the Whitehouse.gov. With the restructure and further investment of education, Obama aims to have the highest proportion of students graduating from college in the world by 2020.
“The President believes that regardless of educational path after high school, all Americans should be prepared to enroll in at least one year of higher education or job training to better prepare our workforce for a 21st century economy,” reported Whitehouse.gov.
Every eligible student can get up to $1,800 for each year. A student could get up to $3,600 if he or she is in a Midwestern disaster area, according to the Internal Revenue Service, United States Department of Treasury.
A student is allowed a credit of 100 percent of the first $1,200, and $2,400 if it’s a student in a Midwestern disaster area, of qualified tuition and related fees paid during the tax year. He or she will also receive 50 percent of the next $1,200 and $2,400 if it’s a student in a Midwestern disaster area.
To qualify for the credit, students must be enrolled at least part-time during a minimum of one academic period.
Finally, students are not eligible if they have any federal or state felony convictions for possessing or distributing a controlled substance as of the end of the tax year.
Included with the Hope Credit, the tuition and fees tax deduction has been extended until Dec. 31, 2009 as part of the $700 billion economic stimulus package, stated the National Association of Student Financial Aid Administrations (NASFAA).
The new credit also allows required course materials as qualifying expenses. The credit can also be claimed for four post-secondary education years instead of two like the previous Hope Credit , according to the White House Web site.
Lifetime Learning Credit
If a student is eligible, his or her credit equals 20 percent (40 percent if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees billed during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.
With these credits, students must choose one tax credit as no one can receive both in the same year. Students also can’t claim either credit if they claim a tuition and fees deduction for the same student in the same year.
To qualify for either credit, students must pay post-secondary tuition and certain related expenses for themselves, their spouse or dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.
To help cope with the increasing costs of post secondary education, the President plans to provide a tax credit to more parents and students during 2009 and 2010, according to the Internal Revenue Service United States Department of the Treasury Accessibility.
Individuals must have a modified adjusted gross income of $48,000 or less. For married couples filing a joint return, their total income can’t exceed $96,000. Once incomes exceed those amounts, the credits are phased out. Individuals, however, aren’t eligible at all if they make a Modified Adjusted Gross Income of $58,000 or more, and married couples filing jointly can’t make more than $116,000.
In addition to the Opportunity Tax Credit, during the next few years the President said he would raise the maximum Pell Grant award to $5,550 per year and indexing it above inflation. That’s an increase of $500 over previous Pell Grants.
Furthermore, Obama said he would push for a $2,500 a year tuition tax credit for students from working families.
To generate more money for aid, Obama said he intends to use public instead of privately funded loan providers. To simplify the financial aid process, Obama plans to eliminate the Free Application for Federal Student Aid (FAFSA) program.
Community College Programs
Besides decreasing the costs of post secondary education, Obama aims to strengthen students’ education through the Community College Partnership Program.
It will provide grants to analyze high-demand skills and technical education to implement new associate of arts degree programs. It’s used as an incentive to get institutions to increase their numbers of graduates and transfers to four-year colleges.
Prior to college entry
President Obama plans to help aid states to develop Early Assessment Programs, which will enable 11th graders and their families to determine if they’re on track to be college ready by the time they graduate. The government will provide $25 million annually in matching funds for states.
For more information on tax credits for post secondary education, visit IRS.gov and for further information on the American Recovery and Investment Act visit www.recovery.gov.