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Schumer: This Enlarged Credit Could Pass in New Economic Stimulus Package

Credit Is New Approach & Major Change - For Every $1 Spent On College Tuition, Middle Class Families 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 in Central New York Could Use the New Tax Credit of Up to $4,000 in Tuition and Textbook Costs for Each Student As Soon As This Tax Year

U.S. Senator Charles E. Schumer today announced he will introduce his bill to quadruple the value of the current college tuition tax benefits and push to pass it as part of the economic recovery package currently being put together in Congress. The bill is a new approach and a major change to the current college tuition tax deduction. The new credit would allow middle class families to deduct the money they spend on tuition for a credit of up to $4,000 per student each year. Schumer said today there is a good change the enlarged credit could pass with the economic stimulus package. If so, middle class families in Central New York could use the new tax credit as soon as this tax year for returns filed next year. Schumer 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. My bill is a new approach that would mean for every $1 dollar spent on college tuition, middle class families get $1 off on their taxes," said Schumer. "A college education shouldn't break the bank for Central New York families. This bill could save middle class families thousands of dollars. In tough economic times like these, this bill will offer families real relief from college tuition costs."
In the last decade, college tuition has skyrocketed across the country in light of rising costs. According to the College Board, private, four-year college tuition rose 6.3 percent last year while public four-year school tuition rose 6.6 percent. In Central New York, tuition has risen 41%, from an average $4,095 to $5,888 at the region's public four-year colleges. And tuition has risen 71%, from an average $18,368 to $30,297 at Central New York's private four-year colleges.
The result of skyrocketing tuition is more students are graduating with massive amounts of debt. About 79% of students attending four-year public college in Central New York graduate with debt, according to the Institute for College Access and Success. The average debt of these graduates is over $19,054. About 69% of students attending a four-year private college leave school with a total debt of $22,107. Students graduating from New York State universities had an average of $21,092 in debt.

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, Schumer today stood with families and students across Central New York at Syracuse University to announce that he will introduce his new bill this week to significantly increase the tax benefits provided by the current higher education tax incentives and push for his bill to be included as part of the economic recovery package. Schumer said his plan would quadruple the middle class tax benefit in many cases, save Central New York families thousands of dollars every year and simplify the process for thousands of New York State families. Schumer said that if it passed, the tax credit would take affect as soon as this tax year.
Schumer’s bill 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 credit. 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.

Credits are generally more valuable than deductions.  For example, a family taking the full $4,000 college tuition deduction will save $600 or $1,000 this year, depending on whether their tax rate is 15 or 25 percent.  The new credit, however, could save this family up to $4,000 per student.


The college tuition tax credit bill works much better than the current tax incentives out there 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 Schumer proposal, they would see their entire federal tax liability disappear and they would save $3,265 for each student, every year. Under the current higher education tax incentives, that family would only have saved $600. 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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