Magazine article Black Issues in Higher Education

Washington UPDATE: Congress Passes Tax, Budget Plan

Magazine article Black Issues in Higher Education

Washington UPDATE: Congress Passes Tax, Budget Plan

Article excerpt

Washington UPDATE: Congress Passes Tax, Budget Plan

Congress and President Clinton reached agreement on a bipartisan budget and tax plan that offers new programs to help families pay for college.

For freshmen and sophomore students, the package includes a tax credit for low and middle-income families on the first $1,000 of college tuition. Students also can gain a 50 percent credit on the next $1,000 of tuition, for a total credit of $1,500.

This program is similar to President Clinton's original HOPE Scholarship program, but provides an added benefit because the most needy students can get Pell Grants as well as tax credits. The maximum Pell Grant also will increase by about $300 next year.

According to one lobbyist, the most needy student does better in this agreement, when compared to the president's original plan.

For upper-class and graduate students, the package offers a 20 percent credit on the first $5,000 of tuition and fees through the year 2002 and the first $10,000 thereafter. Adults returning to school also could receive this credit, and all students still would retain eligibility for other need-based financial aid.

Here are other education-related items in the tax agreement:

- all students would get a tax deduction of up to $2,500 a year for interest paid on education loans. Families and students could claim this credit even if they do not itemize their tax returns;

- families and students would make penalty-free withdrawals from Individual Retirement Accounts (IRAs) to pay for college costs;

- students whose employers pay for undergraduate education could receive benefits worth $5,250 a year before incurring any tax liability;

- parents who participate in state prepaid tuition programs would pay no tax on these benefits. …

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