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Tax deal offers good news for higher education, for now

Thursday, January 03, 2013
In recent weeks, we have been bombarded with news and analyses of the impending fiscal cliff. While military funding, Medicare and Social Security were some of the hot topics, as a potential college student, possible cuts to higher education funding may have piqued your interest.

Tax relief
A temporary agreement was reached between members of the Senate and the House of Representatives earlier this week, which President Barack Obama signed on Wednesday night. According to The New York Times, the bill will protect certain financial aid provisions, such as the American Opportunity Tax Credit, a credit of up to $2,500 of the cost of college tuition, fees and course materials paid during the taxable year. The American Opportunity Tax Credit also allows for 40 percent of the credit (up to $1,000) to be refundable. This means you can get it even if you owe no tax.

The Tuition and Fees Deduction was extended by the deal. This provision allows taxpaying families to claim up to $4,000 in tuition expenses. The bill also protected student loan interest deduction. Left unchecked, the deduction of up to $2,500 in loan interest would have been available for only five years of the repayment term.

Drastic times
While this is good news for students and their parents, further action is necessary to protect crucial federal financial aid programs. Many of the mandatory government spending reductions, known as sequesters, that were set to take effect January 1 have only been postponed.

Members of the Senate and the House of Representatives have until February 28 to come up with more permanent solutions. If they fail to do so, the maximum amount awarded to students through Federal Pell Grants could be cut by up to $400 per year. Mark Kantrowitz, a college financial aid expert, told the news source that other government financial aid programs, such as Federal Supplemental Educational Opportunity Grants, would also face substantial cuts if a more permanent solution is not reached.

Drastic measures
Inside Higher Ed, an online news source for the higher education sector, reports that the government must reduce spending by $6 billion in order to address the growing national deficit. Many federal programs across a range of sectors from health care to education may be affected. At present, specific proposals on which programs will face cuts have yet to be agreed upon, but reductions in federal spending could have serious implications for higher education.

"We're glad the sequester will at least be postponed, but it needs to be repealed entirely and we hope that will be accomplished in the next two months," Barry Toiv, vice president for public affairs at the American Association of Universities, told the news source.ADNFCR-16000756-ID-800938754-ADNFCR - helping you find colleges and universities that offer the accredited programs that most interest you.

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Tax deal offers good news for higher education, for now
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