Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

White House pushes to extend college tuition credit

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- The American Opportunity Tax Credit helped soften the blow of college tuition for more than 12 million students last year, but it's due to expire at the end of this year unless President Obama gets his way.

To remind Congress of the importance of extending the credit, top government advisers spoke to reporters Wednesday about why they believe the break is worth keeping around.

"[Obama] believes that it is important for this to be extended and for families to have the certainty and confidence that this [credit] will be there when they are making the choices about sending their children to college," said Gene Sperling, Counselor to the Treasury Secretary.

The tax break, introduced under the government's 2009 Recovery Act and applicable to 2009 or 2010 college tuition, expands the existing Hope Credit to include more lower- and higher-income Americans.

Unlike the Hope Credit, the AOTC is also partially refundable and covers more of the expenses associated with sending a child to college, like textbooks and computers. It is available for the first four years of post-secondary education, up from two years under the Hope Credit.

More money is also doled out to students and parents under the AOTC. Students with incomes of $80,000 or less qualify for a credit of up to $2,500 a year, an increase of $700 from the previous Hope Credit.

If the tax break is made permanent, a student would be able to receive a credit of up to $10,000 over four years.

Last year, students and families received an average credit of more than $1,700, which is 75% more than the average amount dished out under the Hope Credit, according to a Treasury Department analysis.

The AOTC boosted tax benefits for education expenses by more than 90% and helped 12.5 million students pay for college last year. And because the tax break is refundable, 4.5 million students and their families received an average tax refund of $800 from the credit last year.

But with the cost of making the AOTC permanent running at an estimated $58 billion over a 10-year period, Congress hasn't signaled that it plans to keep the credit around.

Obama and government officials, however, think this particular credit is worth the cost.

"Whether we're in good times or in tough times, we don't ever want to discourage families from investing in their children's future," said Sperling. To top of page

 
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.66%3.65%
15 yr fixed2.77%2.78%
5/1 ARM2.94%2.99%
30 yr refi3.67%3.71%
15 yr refi2.80%2.83%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,828.29 -23.22 -0.13%
Nasdaq 4,901.77 6.88 0.14%
S&P 500 2,090.10 -0.44 -0.02%
Treasuries 1.82 -0.05 -2.51%
Data as of 6:55am ET
Company Price Change % Change
Bank of America Corp... 14.70 -0.22 -1.47%
Apple Inc 100.41 0.79 0.79%
Chesapeake Energy Co... 4.23 -0.12 -2.76%
Freeport-McMoRan Inc... 11.34 -0.31 -2.66%
HP Inc 13.04 0.84 6.89%
Data as of May 26

Sections

Hercules Offshore on Friday said it plans to file its second Chapter 11 filing since August due to financial stress caused by the crash in oil prices. More

A lawsuit against Snapchat has been put on hold after the company said its app wasn't being used during a car crash. More

The gender pay gap in the labor market is pretty well documented. But the gender gap also exists in the housing market. More