President Obama has asked Congress to make permanent a $2,500 college tuition tax credit that is set to expire at the end of the year.
"I am calling on Congress to make this tax credit permanent so it's worth up to $10,000 for four years of college because we've got to make sure that in good times or bad, our families can invest in their children's future and in the future of our country," Obama said in the White House Rose Garden on Wednesday.
The American Recovery Tax Credit, originally included in the $814 billion stimulus package of 2009, allows families to offset the cost of tuition and other college fees with up to $2,500 in credits during the 2009-2010 school year. Individuals earning $80,000 or less, or joint filers who earn $160,000 or less combined, are currently eligible for the full credit.
The soon-to-expire tax rebate expanded the earlier Hope Credit, which covered only $1,800 in tuition and fees during the first two years of school. It made reimbursement available to a broader range of taxpayers, including those with higher incomes and those with don’t owe taxes. It also added the cost of textbooks or other course materials to the list of qualifying expenses.
According to a new analysis issued by the Treasury Department, 12.5 million students and families used the credit last year, receiving an average credit of about $1,700.
This is not the first time Obama has urged lawmakers to keep the tuition tax credit. The credit was included in the budget plan Obama sent to Capitol Hill in February, but lawmakers took no action to extend it.
In addition to extending the $2,500 tax credit and amending it to cover up to four years of college, Obama hopes to increase funding provided through the federal http://studentaid.ed.gov/PORTALSWebApp/students/english/PellGrants.jsp Pell Grant program as well.
According to a White House blog post, the President’s renewed efforts come after many Congressional Republicans announced plans to pursue a 20% cut on education that would reduce financial aid for college students and decrease funding to community colleges.
"There's an educational arms race taking place around the world right now," Obama said at the White House press conference, where he was joined by three families who are currently using the credit to fund their college education. "Cutting back on education would amount to unilateral disarmament. We can't afford to do that."
Republicans opposed to extending the tax credit believe that the President’s education proposals promote more unnecessary and frivolous stimulus spending. How could increasing financial aid hurt the economy? Check out this MainStreet article that looks out a recent survey which indicated that college drop outs cost taxpayers $9 billion.
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