Congress, Obama Reach Deal on Fiscal Cliff

By Abdul-Alim, Jamaal | Diverse Issues in Higher Education, January 17, 2013 | Go to article overview

Congress, Obama Reach Deal on Fiscal Cliff


Abdul-Alim, Jamaal, Diverse Issues in Higher Education


WASHINGTON

For much of the latter part of 2012, most of the talk concerning the federal budget focused on the need to avoid going over the "fiscal cliff."

But with the last-minute passage of the American Taxpayer Relief Act of 2012 on the first day of 2013, the talk in the higher education community now turns to what extent the new law has actually delivered colleges and universities to more solid ground.

Based on reactions collected immediately after the passage of the American Taxpayer Relief Act, some elements of higher education have gained more stable footing while other elements remain in a shaky situation.

"It's good news and cautious news for higher ed," says Robert L. Moran, director of Federal Relations and Policy Analysis for the American Association of State Colleges and Universities.

One of the best things about the new law is that it gives a five-year extension to the American Opportunity Tax Credit. Moran says the tax credit provides up to $2,500 in relief with $1,000 of that able to be refunded.

The credit allows for 100 percent of the first $2,000 paid toward tuition and educational expenses to be deducted, along with 25 percent of the next $2,000.

Moran called the extension a "pleasant surprise" given the fact that initially it was unclear if the tax credit would be extended by even two or three years.

"It allows families to plan ahead, especially lower income families, to take advantage of the refundability of the tax credit," Moran says.

The tax credit is not necessarily a deciding factor in whether students go on to college, Moran says, "but it's become a major portion of financial aid."

"Institutions are starting to sell it as a mechanism within the financial aid package, not so much that it offsets costs but they highlight it for families to take advantage of because it's available to them," Moran says.

On the other hand, Moran says, the American Taxpayer Relief Act did not eliminate the much-dreaded "sequestration" that calls for across-the-board cuts of 8 to 10 percent in the federal budget. It only prolongs the sequester until March 1, giving institutions an additional two months of what Moran called a "breather" to prepare for the cuts.

The additional time is welcome, but higher education proponents say they'd rather see it taken off the table altogether. "We totally agree that spending needs to be reduced, but we think it needs to be reduced in a thoughtful way, and across-the-board cuts is not the way," says Jennifer T. Poulakidas, vice president of Congressional & Governmental Affairs at the Association of Public and Land-Grant Universities. …

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