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Increasing College Access:
HOPE Scholarships,
Lifetime Learning Credit,
Pell Grants & General
Tax Breaks for College
Increasing College Access:
HOPE Scholarships,
Lifetime Learning Credit
Pell Grants &
General Tax Breaks for College
Mrs. Clinton, While 'Listening,' Manages a Jab at Pataki
By ELISABETH BUMILLER
events last week, the First Lady
VALHALLA, N.Y., July 13 - Hil-
was more of a moderator who
lary Rodham Clinton's "listening
found ample opportunity to inter-
tour" ran into Albany's budget im-
ject with her support of programs
passe today when the First Lady
popular to her listeners. When one
expressed seeming incomprehen-
Westchester Community College
sion about the lateness of the state
graduate spoke of his family's diffi-
budget, noting that it must cause
culties in paying his tuition, Mrs.
havoc for local school boards try-
Clinton answered that her husband
ing to plan their fiscal years.
had worked to make college more
By extension, although not by
affordable, but added, "We haven't
name, Mrs. Clinton appeared to
gone far enough."
criticize Gov. George E. Pataki, the
Mrs. Clinton then said, "1 think
Republican blamed by Democrats
that tuition should be tax deduct-
for the stalemate, who last week-
ible, that people should be able to
end called Mrs. Clinton's likely Sen-
save in I.R.A. college accounts, tax
ate campaign "cockamamie."
free." Mrs. Clinton's proposals are
Mrs. Clinton made her remarks
in fact in two separate bills intro-
of
during a two-hour talk with about
duced this year by Senator Charles
50 education officials, parents and
E. Schumer of New York.
students at Westchester Communi-
The proposed bills go considera-
ty College, in the heart of what is a
bly farther in helping families pay
marginally Democratic county of
college tuition than two Clinton ad-
swing voters who are crucial to her
ministration initiatives that passed
chance of winning a Senate race.
in 1997. First, Mr. Schumer's pro-
When a parent from Yonkers com-
posal would allow college tuition of
plained about state education fi-
Keith Meyers/The New York Times
up to $20,000 per student a year to
nancing, Mrs. Clinton responded, in
After visiting Westchester County yesterday, Hillary Rodham Clinton
be tax deductible for families that
what sounded like such a faux-inno-
went to Jones Beach, where she posed with A.J. Hepworth, a lifeguard.
make up to $140,000 annually. And
cent tone that she drew laughter
second, families earning up to
from the crowd: "I don't under-
pass a budget that tells school
publicly, which is that the Governor
$200,000 annually would be able to
stand how you can get your budgets
districts what aid to expect. Mrs.
has not provided the appropriate
contribute up to $2,000 per child a
ready when you don't have a state
Clinton brought up the budget im-
leadership to have the budget
year, tax free, in an Education
budget. I really don't understand
I.R.A.
passe in the car, Mr. McCall said.
how you plan."
passed. She just listened."
The Clinton initiatives allow fam-
Mrs. Clinton traveled to the event
"She said to me, 'Explain why
Listening was the stated theme
ilies with less than $80,000 in annual
with H. Carl McCall, the Democrat-
New York has these chronically
of the day, which included a trip to
income to take up to $1,500 in tax
ic state Comptroller, who warned
late budgets,' Mr. McCall said.
greet astonished sunbathers at
credits for the first two years of
Monday of that suburbs may see
"So I did spend some time kind of
Jones Beach in Nassau County. But
college, plus a $5,000 tax credit for
unnecessary property tax in-
walking her through the budget. I
at the Westchester event, as at
additional schooling or adult re-
creases if the state does not soon
told her what I have been saying
Mrs. Clinton's other "listening"
training.
The New York Times
WEDNESDAY, JULY 14, 1999
there are other needs for the money
and that the plan would dig the na-
Paul Hosefros/The New York Times
tion back into a deep fiscal hole in the
Representative Bill Archer of Texas, chairman of the House Ways and
name of rewarding the wealthy.
After months of sparring, the com-
Means Committee, detailed his plan to cut taxes yesterday.
mittee members also got down to
examining the details of the pro-
er a slightly smaller tax-cutting
cuts until well into the next decade.
posed legislation, working deep into
package.
Of the $864 billion in tax cuts he is
the night in a hearing room packed
President Clinton has made clear
proposing, only $4.6 billion would
with lobbyists, accountants and oth-
that he will veto any bill resembling
take effect next year (the reduction
ers with an interest in the bill's
the current Republican proposals, a
in the capital gains tax would apply
scores of provisions.
threat repeated tonight in a letter
retroactively to profits on transac-
The bill, written by the commit-
from Treasury Secretary Lawrence
tions after June 30 of this year).
tee's chairman, Representative Bill
H. Summers to Mr. Archer. But he
The cuts would increase to $25.5
Archer of Texas, would cut personal
has also signaled a willingness to
billion in 2001, $46.7 billion in 2002 and
income tax rates by 10 percent in
negotiate a compromise.
four steps over the next decade. It
$203.4 billion in 2009..
With projections of the budget sur-
would also cut the top tax rate on
plus growing almost by the month,
By far the biggest component of
capital gains to 15 percent from 20
Republicans see this as the most
Mr. Archer's bill is the reduction in
percent, repeal the tax on large in-
propitious time since the beginning
personal income tax rates, which
heritances, give a break to many
of the Reagan Administration to
would total $405.2 billion over 10
married couples and simplify tax
push a broad tax cut through Con-
years. The cuts would start in 2001,
preparation for many people by
gress.
when the current 15 percent income
phasing out the alternative mini-
The Congressional Budget Office
tax bracket would be reduced to 14.7
mum tax for individuals.
estimated earlier this month that the
percent, the current 28 percent
Mr. Archer's bill would gradually
surplus would total $2.9 trillion over
bracket would be reduced to 27.3
reduce the capital gains tax rate for
the next decade. Of that, $1.9 trillion
percent and the top bracket of 39.6
corporations, to 25 percent from 35
comes from excess payroll tax reve-
percent would fall to 38.7 percent.
percent, a provision valued at $17.4
nues earmarked for Social Security,
billion over 10 years.
and the two parties have agreed to
It would respond to pleas from
use that money only to reduce the
particular industries, like restau-
national debt or shore up the retire-
rants, which would benefit from its
ment system.
proposal to increase the deductibility
But nearly $1 trillion is up for
of business meals gradually to 80
grabs in political terms.
percent from 50 percent.
Republicans say that nearly all of
It also contains even more narrow-
it should go to tax cuts and that there
ly drawn special interest provisions,
is plenty of other money for spending
like the repeal of a 10 percent excise
programs and to solve the looming
tax on fishing tackle boxes, at a cost
financial problems in Medicare.
to the Treasury of $30 million over
Mr. Clinton wants to use $250 bil-
the next decade,
lion of the surplus for tax cuts and to
The committee, where all tax
divide the rest among Medicare and
legislation in Congress must origi-
various spending programs includ-
nate, plans to vote on the proposal on
ing education, health and the mili-
Wednesday, with approval all but
tary.
certain given the Republican major-
Because the projected surpluses
ity. The full House is scheduled to
are relatively small in the next few
take up the plan later in the month.
years but become substantially big-
A similar process will begin next
ger in subsequent years, Mr. Arch-
week in the Senate, which will consid-
er's tax bill delays most of its tax
The New York Times
WEDNESDAY, JULY 14, 1999
Bill Summary & Status
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Bill Summary & Status for the 106th Congress
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TITLE(S):
SHORT TITLE(S) AS INTRODUCED:
Make College Affordable Act of 1999
OFFICIAL TITLE AS INTRODUCED:
A bill to amend the Internal Revenue Code of 1986 to make higher education more affordable by
providing a full tax deduction for higher education expenses and interest on student loans.
STATUS: Floor Actions
***NONE***
STATUS: Detailed Legislative Status
Senate Actions
Feb 25, 99:
Read twice and referred to the Committee on Finance.
STATUS: Congressional Record Page References
02/25/99 Introductory remarks on Measure (CR S2022)
COMMITTEE(S):
COMMITTEE(S) OF REFERRAL:
Senate Finance
AMENDMENT(S):
***NONE***
COSPONSORS(1):
Sen Moynihan, Daniel Patrick - 02/25/99
SUMMARY:
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(AS INTRODUCED)
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Make College
Top Affordable Act of 1999 - Amends the Internal Revenue Code to allow the
deduction of qualified higher education expenses and interest on qualified higher education loans. Limits
such deduction based on modified adjusted gross income.
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S 473 IS
106th CONGRESS
1st Session
S. 473
To amend the Internal Revenue Code of 1986 to make higher education more affordable by providing a
full tax deduction for higher education expenses and interest on student loans.
IN THE SENATE OF THE UNITED STATES
February 25, 1999
Mr. SCHUMER (for himself and Mr. MOYNIHAN) introduced the following bill; which was read twice
and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to make higher education more affordable by providing a
full tax deduction for higher education expenses and interest on student loans.
Be it enacted by the Senate and House of Representatives of the United States of America in
Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the "Make College Affordable Act of 1999'.
SEC. 2. DEDUCTION FOR HIGHER EDUCATION EXPENSES.
(a) DEDUCTION ALLOWED- Section 221 of the Internal Revenue Code of 1986 is amended to
read as follows:
'SEC. 221. HIGHER EDUCATION EXPENSES.
'(a) ALLOWANCE OF DEDUCTION- In the case of an individual, there shall be allowed as a
deduction an amount equal to--
'(1) the qualified higher education expenses, and
'(2) interest on qualified higher education loans,
paid by the taxpayer during the taxable year.
`(b) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME-
'(1) IN GENERAL- The amount which would (but for this subsection) be taken into
account under subsection (a) shall be reduced (but not below zero) by the amount
determined under paragraph (2).
'(2) AMOUNT OF REDUCTION- The amount determined under this paragraph equals the
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amount which bears the same ratio to the amount which would be so taken into account as--
'(A) the excess of--
`(i) the taxpayer's modified adjusted gross income for such taxable year, over
`(ii) $100,000 ($140,000 in the case of a joint return), bears to
'(B) $20,000.
'(3) MODIFIED ADJUSTED GROSS INCOME- For purposes of this subsection, the term
`modified adjusted gross income' means the adjusted gross income of the taxpayer for the
taxable year determined--
'(A) without regard to this section and sections 911, 931, and 933, and
'(B) after the application of sections 86, 135, 219, 220, and 469.
For purposes of the sections referred to in subparagraph (B), adjusted gross income shall be
determined without regard to the deduction allowed under this section.
'(4) INFLATION ADJUSTMENTS-
'(A) IN GENERAL- In the case of a taxable year beginning after 2000, the $100,000
and $140,000 amounts described in paragraph (2) shall each be increased by an
amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the
calendar year in which the taxable year begins, determined by substituting
`calendar year 1999' for `calendar year 1992' in subparagraph (B) thereof.
'(B) ROUNDING- If any amount as adjusted under subparagraph (A) is not a
multiple of $5,000, such amount shall be rounded to the next lowest multiple of
$5,000.
`(c) QUALIFIED HIGHER EDUCATION EXPENSES- For purposes of this section--
'(1) QUALIFIED HIGHER EDUCATION EXPENSES-
'(A) IN GENERAL- The term `qualified higher education expenses' means--
`(i) tuition and fees charged by an educational institution and required for the
enrollment or attendance of--
`(I) the taxpayer,
`(II) the taxpayer's spouse,
`(III) any dependent of the taxpayer with respect to whom the taxpayer is
allowed a deduction under section 151, or
'(IV) any grandchild of the taxpayer,
as an eligible student at an institution of higher education, and
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`(ii) reasonable living expenses for such an individual while away from home
and attending such institution.
`(B) ELIGIBLE COURSES- Amounts paid for qualified higher education expenses of
any individual shall be taken into account under subsection (a) only to the extent such
expenses--
`(i) are attributable to courses of instruction for which credit is allowed toward
a baccalaureate degree by an institution of higher education or toward a
certificate of required course work at a vocational school, and
`(ii) are not attributable to any graduate program of such individual.
'(C) EXCEPTION FOR NONACADEMIC FEES- Such term does not include any
student activity fees, athletic fees, insurance expenses, or other expenses unrelated to
a student's academic course of instruction.
'(D) ELIGIBLE STUDENT- For purposes of subparagraph (A), the term `eligible
student' means a student who--
`(i) meets the requirements of section 484(a)(1) of the Higher Education Act of
1965 (20 U.S.C. 1091(a)(1)), as in effect on the date of the enactment of this
section, and
`(ii) is carrying at least one-half the normal full-time work load for the course
of study the student is pursuing, as determined by the institution of higher
education.
'(E) IDENTIFICATION REQUIREMENT- No deduction shall be allowed under
subsection (a) to a taxpayer with respect to an eligible student unless the taxpayer
includes the name, age, and taxpayer identification number of such eligible student on
the return of tax for the taxable year.
'(2) INSTITUTION OF HIGHER EDUCATION- The term `institution of higher education'
means an institution which--
'(A) is described in section 481 of the Higher Education Act of 1965 (20 U.S.C.
1088), as in effect on the date of the enactment of this section, and
'(B) is eligible to participate in programs under title IV of such Act.
'(d) QUALIFIED HIGHER EDUCATION LOAN- For purposes of this section--
'(1) IN GENERAL- The term `qualified higher education loan' means a loan which is--
'(A) made, insured, or guaranteed by the Federal Government,
'(B) made by a State or a political subdivision of a State,
'(C) made from the proceeds of a qualified student loan bond under section 144(b), or
'(D) made by an institution of higher education (as defined in section 1201(a) of the
Higher Education Act of 1965 (20 U.S.C. 1141(a))).
'(2) LIMITATION- The amount of interest on a qualified higher education loan which is
taken into account under subsection (a)(2) shall not exceed the amount which bears the
same ratio to such amount of interest as--
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'(A) the proceeds from such loan used for qualified higher education expenses, bears
to
'(B) the total proceeds from such loan.
For purposes of the preceding sentence, the term `qualified higher education expenses' shall
be determined without regard to subsection (c)(1)(A)(i)(IV).
'(e) SPECIAL RULES-
'(1) NO DOUBLE BENEFIT-
'(A) IN GENERAL- No deduction shall be allowed under subsection (a) for any
expense for which a deduction is allowable to the taxpayer under any other provision
of this chapter unless the taxpayer irrevocably waives his right to the deduction of
such expense under such other provision.
'(B) DENIAL OF DEDUCTION IF CREDIT ELECTED- No deduction shall be
allowed under subsection (a) for a taxable year with respect to the qualified higher
education expenses of an individual if the taxpayer elects to have section 25A apply
with respect to such individual for such year.
'(C) DEPENDENTS- No deduction shall be allowed under subsection (a) to any
individual with respect to whom a deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar year in which such individual's
taxable year begins.
'(D) COORDINATION WITH EXCLUSIONS- A deduction shall be allowed under
subsection (a) for qualified higher education expenses only to the extent the amount
of such expenses exceeds the amount excludable under section 135 or 530(d)(2) for
the taxable year.
'(2) LIMITATION ON TAXABLE YEAR OF DEDUCTION-
'(A) IN GENERAL- A deduction shall be allowed under subsection (a) for qualified
higher education expenses for any taxable year only to the extent such expenses are in
connection with enrollment at an institution of higher education during the taxable
year.
'(B) CERTAIN PREPAYMENTS ALLOWED- Subparagraph (A) shall not apply to
qualified higher education expenses paid during a taxable year if such expenses are in
connection with an academic term beginning during such taxable year or during the
first 3 months of the next taxable year.
'(3) ADJUSTMENT FOR CERTAIN SCHOLARSHIPS AND VETERANS BENEFITS-
The amount of qualified higher education expenses otherwise taken into account under
subsection (a) or (d)(2) with respect to the education of an individual shall be reduced
(before the application of subsection (b)) by the sum of the amounts received with respect to
such individual for the taxable year as--
'(A) a qualified scholarship which under section 117 is not includable in gross
income,
`(B) an educational assistance allowance under chapter 30, 31, 32, 34, or 35 of title
38, United States Code, or
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'(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning
of section 102(a)) for educational expenses, or attributable to enrollment at an eligible
educational institution, which is exempt from income taxation by any law of the
United States.
'(4) NO DEDUCTION FOR MARRIED INDIVIDUALS FILING SEPARATE
RETURNS- If the taxpayer is a married individual (within the meaning of section 7703),
this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for
the taxable year.
'(5) NONRESIDENT ALIENS- If the taxpayer is a nonresident alien individual for any
portion of the taxable year, this section shall apply only if such individual is treated as a
resident alien of the United States for purposes of this chapter by reason of an election under
subsection (g) or (h) of section 6013.
'(6) REGULATIONS- The Secretary may prescribe such regulations as may be necessary or
appropriate to carry out this section, including regulations requiring recordkeeping and
information reporting.'
(b) DEDUCTION ALLOWED IN COMPUTING ADJUSTED GROSS INCOME- Paragraph (17)
of section 62(a) of such Code is amended to read as follows:
'(17) HIGHER EDUCATION EXPENSES- The deduction allowed by section 221.'
(c) CONFORMING AMENDMENTS-
(1) The table of sections for part VII of subchapter B of chapter 1 of such Code is amended
by striking the item relating to section 221 and inserting the following new item:
`Sec. 221. Higher education expenses.'
(2) Section 6050S(e) of such Code is amended by striking `section 221(e)(1)' and inserting
section 221(d)(1)'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to payments made
after December 31, 1998.
END
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TITLE(S):
SHORT TITLE(S) AS INTRODUCED:
Save for College Act of 1999
OFFICIAL TITLE AS INTRODUCED:
A bill to amend the Internal Revenue Code of 1986 to provide a deduction for contributions to
education individual retirement accounts, and for other purposes.
STATUS: Floor Actions
***NONE***
STATUS: Detailed Legislative Status
Senate Actions
Feb 25, 99:
Read twice and referred to the Committee on Finance.
STATUS: Congressional Record Page References
02/25/99 Introductory remarks on Measure (CR S2022)
COMMITTEE(S):
COMMITTEE(S) OF REFERRAL:
Senate Finance
AMENDMENT(S):
***NONE***
COSPONSOR(S):
***NONE***
SUMMARY:
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(AS INTRODUCED)
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Save for College
Top
Act of 1999 - Amends the Internal Revenue Code with respect to educational
individual retirement accounts to: (1) allow a deduction for contributions; (2) increase contribution
amounts and income factors; and (3) provide for inflation adjustments.
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Save for College Act of 1999 (Introduced in the Senate)
S 474 IS
106th CONGRESS
1st Session
S. 474
To amend the Internal Revenue Code of 1986 to provide a deduction for contributions to education
individual retirement accounts, and for other purposes.
IN THE SENATE OF THE UNITED STATES
February 25, 1999
Mr. SCHUMER introduced the following bill; which was read twice and referred to the Committee on
Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide a deduction for contributions to education
individual retirement accounts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in
Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the 'Save for College Act of 1999'.
SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO EDUCATION INDIVIDUAL
RETIREMENT ACCOUNTS.
(a) IN GENERAL- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986
(relating to additional itemized deductions for individuals) is amended by redesignating section
222 as section 223 and by inserting after section 221 the following new section:
'SEC. 222. EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS.
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`In the case of an individual, there shall be allowed as a deduction the amount paid in cash during
the taxable year by such individual to an education individual retirement account under section
530.'
(b) DEDUCTION ALLOWED IN ARRIVING AT ADJUSTED GROSS INCOME- Paragraph (7)
of section 62(a) of such Code (relating to retirement savings) is amended--
(1) by inserting 'OR EDUCATION" after `RETIREMENT' in the heading of such
paragraph, and
(2) by inserting before the period at the end the following: `and the deduction allowed by
section 222 (relating to education individual retirement accounts)'.
(c) MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT ACCOUNTS-
(1) INCREASE IN CONTRIBUTION LIMIT- Section 530(b)(1)(A)(iii) of such Code
(defining education individual retirement account) is amended by striking `$500' and
inserting '$2,000'.
(2) INCREASE IN AGI LIMITS- Section 530(c)(1) of such Code (relating to reduction in
permitted contributions based on adjusted gross income) is amended--
(A) by striking `$95,000 ($150,000' in subparagraph (A)(ii) and inserting `$100,000
($140,000', and
(B) by striking subparagraph (B) and inserting the following new subparagraph:
'(B) $20,000.'
(3) INFLATION ADJUSTMENTS- Section 530 of such Code is amended by adding at the
end the following new subsection:
`(i) INFLATION ADJUSTMENTS-
'(1) DOLLAR LIMITATION ON AMOUNT OF CONTRIBUTION-
'(A) IN GENERAL- In the case of a taxable year beginning after 1999, the $2,000
amount under subsection (b)(1)(A)(iii) shall be increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the
calendar year in which the taxable year begins, determined by substituting
`calendar year 1998' for `calendar year 1992' in subparagraph (B) thereof.
'(B) ROUNDING- If any amount as adjusted under subparagraph (A) is not a
multiple of $100, such amount shall be rounded to the next lowest multiple of $100.
'(2) INCOME LIMITS-
'(A) IN GENERAL- In the case of a taxable year beginning after 1999, the $100,000
and $140,000 amounts under subsection (c)(1)(A)(ii) shall each be increased by an
amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3) for the
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calendar year in which the taxable year begins, determined by substituting
`calendar year 1998' for `calendar year 1992' in subparagraph (B) thereof.
`(B) ROUNDING- If any amount as adjusted under subparagraph (A) is not a
multiple of $5,000, such amount shall be rounded to the next lowest multiple of
$5,000.'
(d) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B of chapter 1 of
such Code is amended by striking the item relating to section 222 and inserting the following new
items:
`Sec. 222. Education individual retirement accounts.
`Sec. 223. Cross references.'
(e) EFFECTIVE DATE- The amendments made by this section shall apply to contributions made
in taxable years beginning after December 31, 1998.
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Tax Relief
PRESIDENT CLINTON and VICE PRESIDENT GORE:
TAX CUT PLAN FOR WORKING FAMILIES UNIVERSAL SAVINGS
ACCOUNTS PLUS TARGETED TAX CUTS
President Clinton has worked to deliver tax relief to America's working families. In 1993, the President
delivered a tax cut to 15 million working families through an expanded ETC.. Then, in 1997, the
President delivered a $500 child tax credit and $1,500 HOPE Scholarships to make the first two years of
college universally available. The result: the lowest federal tax burden in two decades for a typical
middle-income family. To build on this record of tax relief for working families, President Clinton
proposes significant new tax relief for America's working families:
USA Accounts -- A $536 Billion Tax Cut Over 15 Years
The President's plan would allocate 12 percent of the projected surpluses to create new Universal Savings
Accounts (USAs) so all working Americans can build wealth to meet their retirement needs. Elements of
this powerful new tax incentive -- the USA account -- could, for example, include:
Automatic flat annual contributions for low and moderate working
Americans;
An additional tax incentive to match a portion of each dollar on a
progressive basis that an individual voluntarily contributes.
Additional Tax Cuts for Working Families
The President's budget provides $34 billion over five years in additional paid-for targeted tax relief to
modernize our schools, to help working families care for elderly parents, and to better afford child care.
Highlights of the President's tax relief plan include:
Make Health Care More Affordable
A $1,000 Long-term Care Tax Credit to help pay for formal and informal long-term care
services for about 2 million Americans, including 1.2 million older Americans, over 500,000
non-elderly adults, and approximately 250,000 children at a cost of $5.6 billion over five years.
A $1,000 Tax Credit for Work-related Expenses for People with Disabilities to help
cover the formal and informal costs that are associated with employment, such as
special transportation and technology needs. This tax credit will help 200,000 to 300,000
Americans, and costs $700 million over 5 years.
Expand Education Tax Incentives
Tax Credits to Build Modern Schools for Our Children. A centerpiece of the President's tax
cut agenda is to provide Federal tax credits to pay interest on nearly $25 billion in bonds to build
and renovate public schools. Two types of bonds are being proposed: School Modernization
Bonds ($22.4 billion) and Qualified Zone Academy Bonds ($2.4 billion). $400 million of the
school modernization bonds will go to tribes or tribal organizations for the construction and
renovation of BIA funded schools. The tax credits on these bonds will cost $3.7 billion over 5
years.
Other Education Tax Incentives include the elimination of the 60-month limit on student
loan interest deduction at a cost of $281 million over five years; an 18 month extension and an
expansion of the tax- favored treatment of employer provided education (Section 127); a
new 10% credit for employer-provided workplace literacy and basic education programs;
a 50 percent credit for corporate sponsorship payments to qualified zone academies.
Make Child Care More Affordable
Tax Relief for Child Care for Three Million Working Families, Plus Tax Relief to Parents Who
Stay at Home. The President's proposal increases the child and dependent care tax credit (CDCTC) for
families earning up to $59,000, providing an additional average tax cut of $345 for these families and
eliminating income tax liability for almost all families with incomes below 200% of poverty ($35,000
for a family of four) that claim the maximum allowable child care expenses. The President also
proposes to enable parents who have children under one year old to take advantage of the CDCTC by
allowing them to claim assumed child care expenses of $500. The President's budget proposal will
provide an average tax credit of $178 and will benefit 1.7 million families. Overall, this combined
proposal costs $6.3 billion over five years.
Provide Incentives to Revitalize Communities
Better America Bonds. The President is proposing Federal tax credits to pay the interest on $9.5
billion in bonds over five years for investments by state, local and tribal governments. The bonds can be
used to preserve green space, create or restore urban parks, protect water quality, and clean up
brownfields (abandoned industrial sites). The cost is $673 million over five years.
New Markets Tax Credit. To help spur $6 billion in new equity capital for investment in America's
New Markets, President Clinton is proposing a tax credit worth up to 25 percent for investments in a
wide range of vehicles targeted to underserved communities, including community development banks,
community development corporations and venture capital funds, and new targeted investment vehicles
proposed by President Clinton known as America's Private Investment Companies (APICs) and New
Market Venture Capital Firms. A wide range of businesses could be financed by these investment funds,
including small technology firms, inner-city shopping centers, manufacturers with hundreds of
employees, and retail stores. The proposal costs roughly $980 million over five years.
Increase the Low-Income Housing Tax Credit. To expand and improve the supply of available low
income housing, the budget raises the allocation of low-income housing tax credits to States. The
President proposes to raise the State per capita cap from $1.25 to $1.75 beginning in 2000 at a cost of
$1.7 billion over five years. This increase will lead to an additional 150,000 to 180,000 units of
affordable housing over five years.
Increasing Energy Efficiency and Improve the Environment
Tax Credits For More Fuel Efficient Vehicles and Homes. The budget contains $3.6 billion over the
next 5 years in tax cuts for energy-efficient purchases and renewable energy, including: tax credits of
between $1,000 and $4,000 for consumers who purchase advanced-technology, highly fuel-efficient
vehicles; a 15 percent credit (up to $2,000) for purchases of rooftop solar equipment -- to provide
incentives for meeting the Million Solar Roofs goal; and a tax credit of up to $2,000 for purchasing
energy-efficient new homes.
Extend Expiring Provisions
One-year extenders package including the Work Opportunity Tax Credit, the Welfare-to-Work
Tax Credit, and the R & E Tax Credit.
Personal Credits and the Alternative Minimum Tax (AMT). The deductibility of personal credits,
such as the $500 child tax credit, the HOPE Scholarship, the CDCTC, and Lifetime Learning tax credit
against the AMT would be extended for two years -- tax years 1999 and 2000 -- at a cost of $1.4 billion
over five years. Extending this provision will greatly simplify tax preparation for millions of families.
Curb Corporate Tax Shelters and Reduce Unwarranted Tax Subsidies
The $34 billion over five years in targeted tax cuts are paid for with proposals to curb corporate tax shelters and
reductions in unwarranted tax subsidies. Addressing tax shelters is important to stem perceptions of unfairness
and disrespect for the system. The budget increases disincentives for entering into abusive transactions and
attacks specific tax shelter transactions. The Treasury will continue to study additional remedies for corporate
tax shelters and will work with Congress to address this issue.
IMPROVING ACCESS TO HIGHER EDUCATION
I.
Administration Position
-Accomplishments Document
II.
Department of Education/ Programs and Policies
-Reauthorization 1998: Changes to the Law
-Packet/ US Dept of Education: The HOPE Scholarship and Lifetime Learning Credits
-The Student Guide to Financial Aid: Federal Pell Grants
-Two pager on HOPE, tax deductions and PELL
-Helping More Students Prepare for College through GEAR UP
III.
ESEA/FY2000
IV. NEA/AFT
V.
Studies/Info
-NCES Fast Facts/ Higher Education Enrollment Levels
-NCES Fast Facts/Financial Aid for Postsecondary Students
-NCES Fast Facts/US Expenditures on Higher Education
VI.
General News Articles
- Study: qualities Persist In accessto
I.
VII. HRC Involvement/ Events and Columns
Higher Ed
Administration Position
CLINTON/GORE ACCOMPLISHMENTS IN EDUCATION
IMPROVING ACCESS TO HIGHER EDUCATION
PAST ACCOMPLISHMENTS/Budget Wins as updated 5/99
*Opportunity through Tax Credits- college is now more universally available due to the
HOPE Scholarship program which allows a $1,500 tax credit for the first two years of college.
Through the Lifetime Learning Credit a 20% tax credit is available to offset tuition costs for the
later years of learning. This credit helps offset tuition costs for college juniors, seniors, graduate
and professional degree students, and adults who go back to school, change careers, or take
courses to upgrade skills.
*Opportunity through Education IRAs- for each child under the age of 18, families may now
deposit $500 a year into an Education IRA in a child's name. Interest on these accounts is
exempt from taxation if used for higher education. As of January 1998, taxpayers are also
allowed to withdraw funds from regular IRAs, without penalty, for higher education expenses of
their own, their spouses, their children or their grandchildren.
*Opportunity through Work Study and Increased Pell Grants- Nearly one million students
will be able to work their way through college due to the expansion of the Work Study Program.
Nearly four million students will receive a Pell Grant in 1999 of up to $3,125, the largest
maximum award ever [up from $2,300 in 1993].
*Affordability through Student Loans- through the Administration's efforts, student fees and
interest rates on all loans have been cut, options for repayment have been expanded to include an
income contingent plan, and service through the Direct Loan Program has been improved.
*Preparing Youth for College through GEAR-UP/TRIO- the Gear-Up program is a new
program established by the Administration to help 100,000 low income middle school children
prepare for and apply for college. In FY99 $600 million was also appropriated to the TRIO
college preparation program.
*Paying for College through Community Service- through AmeriCorps, more than 100,000
young people have served their communities while earning money for college and building
applicable workforce skills.
*Increased Funding for HBCU's - Funding for Historically Black Colleges and University was
increased over $250 million between FY92-98-an increase of nearly 25 percent.
*Increased Funding for HIS's- the Administration has gradually increased support for Hispanic
Serving Institutions by 11%. HIS's are colleges or universities with at least 25% Hispanic
enrollment.
*Accrediting Tribal Colleges and Universities- the President has signed an executive order to
ensure full accreditation to Tribal Colleges and Universities while giving them the tools and
resources to do so.
CURRENT INTIATIVES
FY2000 Budget Initiatives
*Increased Pell Grants- the Budget provides over $7 billion to raise the Pell maximum award to
$3,250, a $125 increase.
*More Work Study- the Budget proposes $934 million for the Work Study program, a $64
million increase over 1999. This level provides enough funding to meet the President's goal of
providing one million students the opportunity to work their way through college by 2000.
*Doubling Gear Up- the budget doubles funding for the GEAR-UP program from $120mill in
FY99 to $240million in FY2000. In 2,000, GEAR-UP will help 381,000 middle school students
prepare for college.
*Preparing Disadvantaged Youth for College- the budget includes a $30million increase in the
federal TRIO program which funds outreach, counseling and educational support to
disadvantaged students preparing for academic success in college. The budget also includes $35
million for a new initiative to help disadvantaged students stay in college and earn their
diplomas.
PRESIDENT CLINTON:
EXPANDING COLLEGE OPPORTUNITIES FOR ALL
October 7, 1998
"I can think of no more worthy aim for a piece of legislation than to bring the riches of higher learning to the next
generation of Americans. I know the Congressmen assembled here share the pride and awe I feel as I make this noble
legislation the law of the land.
President Bill Clinton
October 7, 1998
Today, President Clinton is joined at the White House by Education Secretary Richard Riley and a bi-partisan
group of Congressional members as he signs legislation extending the Higher Education Act and enacts five
important new initiatives to improve educational opportunities, teacher preparation, and recruitment.
EXTENDING EDUCATIONAL OPPORTUNITIES, STRENGTHENING HIGHER EDUCATION. The Higher Education Act,
originally enacted in 1965, authorizes many of the federal government's programs to increase access to college,
including federal Pell grants, student loans, work-study, as well as programs to improve teacher training, strengthen
developing. institutions, and promote innovation. Today, President Clinton is signing legislation reauthorizing the
Higher Education Act for five years, and including proposals requested by the President that:
Slash The Student Loan Interest Rate by extending the the student loan rate for college of 7.46 for an
additional five years, down from 8.25 %, saving students $11 billion over the next five years;
Help Disadvantaged Children Prepare For College. The legislation launches a new national effort
based on the President's High Hopes for College Initiative to help disadvantaged students prepare for
college. This program, called GEAR UP, that provides competitive grants to colleges that partner with
high-poverty middle schools and families to inform them as early as possible about financial aid available
for college, and to provide long-term mentoring and tutoring;
Improve Teacher Preparation And Recruitment. This legislation includes the President's proposals and
more, it: (1) provides grants between teacher education institutions and school districts to produce teachers
who have strong teaching and technology skills; (2) recruits additional teachers for high-need areas through
grants to partnerships between high-quality teacher education programs and locals schools; (3) supports
state-level efforts to improve teacher quality through grants to strengthen teacher certification, create
alternative ways into teaching, hold higher education institutions responsible for the quality of teacher they
prepare, and recruit high-quality teachers; (4) strengthens accountability in teacher education by requiring
that states and teacher education institutions report on teacher preparation, including their students'
performance on teacher licensing exams;
Promote High Quality Distance Education. This legislation authorizes the Learning Anytime Anywhere
Partnership (LAAP) program, that will provide grants to partnerships between schools and other entities to
create new distance learning models, explore the efficacy of cost reduction through institutional
partnerships, and develop innovative measures of student achievement in distance education. This
legislation also expands student aid eligibility for distance learners nontraditional students, such as full-
time workers, parents, and people in rural areas who are in higher education programs;
Is An Historic Step Toward A New Model Of Government. This bill creates a Performance-Based
Organization (PBO) to deliver financial aid -- loans, grants, work-study and other assistance -- that will be
led by an executive with expertise in information technology and experience with financial systems, who
reports directly to the Secretary of Educations and has new administrative flexibility in exchange for
increased accountability for results.
PRESIDENT CLINTON AND VICE PRESIDENT GORE:
COLLEGE OPPORTUNITY FOR EVERYONE
February 25, 1998
"Student loans are already less expensive and easier to repay, and now you get to
deduct the interest. Because of what we have done, we can make college as universal in
the 21st Century as high school is today. And, that will change the face and future of
America.'
President Bill Clinton
January 27, 1998
Today, Vice President Gore announces an Administration proposal to move forward with a scheduled
10% reduction in the interest rate on student loans, while improving the program to help ensure lenders
an adequate profit.
STUDENTS WILL BENEFIT SUBSTANTIALLY FROM THE INTEREST RATE CUT. Under reforms enacted
in the 1993 budget deal, the interest rate on student loans will drop by an estimated 10% on July 1,
reducing the rate students are projected to pay on loans from an average 7.8% over the next five years
to 7.0%. This drop will save borrowers hundreds of dollars in interest.
LOWER RATES CAN BE PROFITABLE FOR LENDERS. To eliminate unnecessary costs to lenders, the
Administration is proposing that the formula for setting the interest rate be adjusted so that it more
closely tracks lenders' own financing practices, eliminating inefficiencies, and making a lower rate
possible for student borrowers.
THE LARGEST INVESTMENT IN HIGHER EDUCATION IN 50 YEARS. This announcement is part of the
Administration's efforts to identify fiscally responsible policies that help strengthen education and
expand college opportunity. To expand college opportunity the President and Vice President are:
Improving Access and Opportunity for Student Loans. More than 5 million students and
parents will take out $30 billion in Federally-backed student loans this year. Under this
Administration, the up-front fees on those loans have been cut by as much as half, interest costs
are lower, and students have more repayment options than ever before, including the
pay-as-you-earn (income contingent) repayment plan.
Increasing Investment for Pell Grants. For two years, President Clinton has proposed
record increases in the maximum Pell Grant award. Nearly 4 million low-and
moderate-income students will receive a Pell Grant of up to $3,000, 30% more than when
President Clinton came into office.
Promoting the Hope Scholarship Credit. Families are eligible for tax credits of up to $1500
per-student for tuition in a student's first year and another $1500 in the second year. 5.8
million students are estimated to benefit annually.
Proposing Education IRAs. For each child under age 18, families may now deposit $500 per
year into an Education IRA in the child's name. Interest on these accounts is exempt from
taxation if used for higher education.
Initiating a Life Time Learning Credit. This tax credit helps offset tuition costs for college
juniors, seniors, graduate and professional degree students, and adults who go back to school,
change careers, or take courses to upgrade their skills.
PRESIDENT CLINTON:
PREPARING FOR COLLEGE: MENTORING AMERICA'S YOUTH
February 4, 1998
"I also ask this Congress to support our efforts to enlist colleges and universities to
reach out to disadvantaged children starting in the sixth grade so that they can get the guidance
and hope they need so they can know that they, too, will be able to go on to college.'
President Bill Clinton
January 27, 1998
Today, President Clinton announces a new initiative to inspire more young people to have high
expectations, to stay in school and study hard, and to go to college. The High Hopes initiative is a
long-term investment starting with $140 million in the FY 99 Budget -- that promotes partnerships
between colleges and middle or junior high schools in low-income communities, to help teach students
how they should go to college by informing them about college options, academic requirements, costs,
and financial aid, and by providing support services -- including tutoring, counseling, and mentoring.
EDUCATING FAMILIES EARLY ON: COLLEGE Is WITHIN REACH. Families need to know that college is
affordable regardless of their income. The President's High Hopes initiative provides children and their
families at middle and junior high schools in low-income communities with a 21st Century Scholar
certificate, an official, early notification of the amount of their eligibility for Federal college aid.
PROVIDING CHILDREN WITH THE SUPPORT THEY NEED. To make the hope of a college education a
reality, the High Hopes initiative encourages degree-granting colleges to establish partnerships with
middle and junior high schools with large concentrations of low-income children. Working with parents,
community and religious groups, and businesses, these partnerships provide information about what it
means and what it takes to go to college, as well as support services -- such as mentoring, tutoring,
college visits, summer programs, after-school activities, and counseling -- to help the children stay on
track. The partnerships will help ensure that children have access to the rigorous core courses that
prepare them for college and let parents know how they can help their children prepare for college.
STAYING WITH CHILDREN THROUGH HIGH SCHOOL GRADUATION. This new initiative is flexible,
allowing partnerships to design their own efforts based on local needs and resources. But, to ensure
effectiveness, the programs must:
begin reaching out to children by the 7th grade;
continue to help each student through graduation from high school; and,
help all students in a class, not just the ones who get the best grades.
REACHING MORE THAN 1 MILLION STUDENTS. The President's Budget calls for a $140 million
investment in new High Hopes partnerships in 1999, and an additional $70 million for new partnerships
in each of the years 2000 and 2001 (as well as continuation funds for the original partnerships). If each
project begins with one sixth or seventh grade class, this would fund partnerships with 2,500 middle and
junior high schools. If each project adds an incoming class each year, more than 1 million students would
be served over five years.
WIDESPREAD SUPPORT. Everyone agrees, the High Hopes initaitive is the way to go. More than 300
college presidents, 60 organizations (including Big Brothers/Big Sisters, NAACP, and a variety of other
education and religious groups), and 68 members of the House -- Democrats and Republicans -- have
endorsed the initiative.
COLLEGE OPPORTUNITY FOR EVERYONE:
PREPARING AMERICANS FOR THE 21st CENTURY
January 9, 1998
"Thanks to brand-new HOPE scholarships and other initiatives, money will no longer be an
obstacle to a college education. For the first time in the nation's history, the only prerequisites to college
are preparation and desire. We have delivered on our promise to make 13th and 14th grades as accessible
as high school is today. Now you need to seize this opportunity to help us build the promise of America."
President Bill Clinton
January 9, 1998
Today, the President reaffirmed his commitment to further expand educational opportunity for all Americans and
he fulfilled another of his educational opportunity commitments by announcing that his balanced budget proposal
will include a $70 million increase in funding for the Federal Work-Study Program.
THE LARGEST INVESTMENT IN HIGHER EDUCATION IN 50 YEARS. President Clinton continues to identify fiscally responsible
policies that help strengthen education and expand college opportunity. To expand college opportunity the President is:
Expanding Work Study Opportunities. The Federal-Work Study Program offers undergraduate and graduate
students part-time work to help meet their financial needs and to give them work experience helping the campus and
surrounding communities. The funding in the President's budget proposal will bring the total number of projected
work-study participants to just over one million in the 1999-2000 school year -- a full year earlier than promised.
Promoting the Hope Scholarship Credit. This helps make the first two years of college (or post-high school
vocational training) universally available. Families are eligible for tax credits of up to $1500 per-student for tuition
in a student's first year and another $1500 in the second year. 5.8 million students are estimated to benefit annually
Proposing Education IRAs. For each child under age 18, families may now deposit $500 per year into an
Education IRA in the child's name. Interest on these accounts is exempt from taxation if used for higher education.
Taxpayers can withdraw funds from a regular IRA, without penalty, for their own higher education expenses or
their spouse, child, or grandchild.
Initiating a Life Time Learning Credit. This tax credit helps offset tuition costs for college juniors, seniors,
graduate and professional degree students, and adults who go back to school, change careers, or take courses to
upgrade their skills. Families receive a 20% tax credit for the first $5,000 of tuition and required fees paid each
year through 2002, and for the first $10,000 thereafter. 7.1 million students are expected to benefit annually.
Increasing Investment for Pell Grants. For two years, President Clinton has proposed, and Congress has
adopted, record increases in the maximum Pell Grant award. Next year, nearly 4 million low-and moderate-income
students will receive a Pell Grant of up to $3,000, 30% more than when President Clinton came into office.
Improving Access and Opportunity for Student Loans. More than 5 million students and parents will take out
$30 billion in Federally-backed student loans this year. Under student loan reforms enacted in the Administration's
first year, the up-front fees on those loans have been cut by as much as half, interest costs are lower, and students
have more repayment options than ever before, including the pay-as-you-earn (income contingent) repayment plan.
The program simplification pioneered by the Direct Loan Program has also spurred improvements to the
government-guarantee system, improving all students' access to loans.
Instituting AmeriCorps -- a Responsible Way to Pay for College by Doing Community Service. This year, nearly
50,000 young people will take advantage of the opportunity to perform community service, either on a full-time or
part-time basis, allowing them to earn an award to pay for college or repay student loans. Participants in the AmeriCorps
program earn education awards of up to $4,725 for each year of service.
Department of Education
Programs and Policies
SFA - Reauthorization 1998: Change dent Financial Assistance Programs
http://www.ed.gov/offices/OSFAP/Students/fshea.html
Reauthorization 1998:
Changes to the law
governing the Student
Financial Assistance
SFA Home Page
Programs
What's New
Finding Out About
Financial Aid
Every six years, Congress reauthorizes the Higher Education Act of
1965, the law that establishes the Student Financial Assistance (SFA)
Applying For Federal
Programs. On October 7, 1998, President Clinton signed into law the
Student Aid
most recent reauthorization of these programs. This fact sheet
Paying Back Your
describes some of the changes made by the new law.
Student Loan
Help
Loan Interest Rates Drop The interest rates for Stafford Loans
have been reduced. Rates remain variable, but the formula used to
determine the rate each year has changed, producing lower rates. For
this year (July 1, 1998 through June 30, 1999), the rate is 7.46%
during repayment and 6.86% while students are in-school, or in a
deferment or grace period.
Direct Consolidation Loans made after
January 31, 1999 will have fixed interest rates set by the weighted
average of the loans being consolidated, rounded up to the next
highest one-eighth of one percent (not to exceed 8.25%). For more
information on the advantages of loan consolidation and how to apply,
see the Direct Consolidation Loans site.
Federal Consolidation
Loans (made by private lenders) will have the same fixed rate,
effective October 1, 1998.
Aid Amounts Increase The annual maximum for Federal Perkins
Loans has been increased to $4,000 for undergraduates and to
$6,000 for graduate students.
The law authorizes maximum
annual Pell Grant awards ranging from $4,500 in the 1999-2000
academic year to as much as $5,800 in the 2003-2004 academic year.
Note that the actual maximum for each of these academic years will
be determined by the amount Congress appropriates for the program.
Historically, the amount appropriated has resulted in maximum awards
that are greater than the awards in previous years, but less than the
authorized award.
Canceling or Deferring Student Loans If a Stafford Loan
borrower who is seeking an unemployment deferment can provide
documentation that he or she is eligible for unemployment benefits,
the borrower does not need to provide any additional documentation
to get the deferment.
The law establishes a loan forgiveness
program, starting October 1, 1998 for new Stafford Loan borrowers
(with no outstanding balance on a loan from the SFA Programs) who
serve as teachers in designated low-income schools. The borrower
must teach in a low-income school for five consecutive, complete
school years to qualify for cancellation. This program repays loans up
to $5,000.
A similar loan forgiveness program is authorized for
Federal Stafford Loan borrowers who are child care providers. This
is a demonstration program and will not be available until Congress
appropriates funds for that purpose.
Stafford, PLUS, and Federal
Supplemental Loans for Students may now be cancelled in cases
where a school fails to make a required refund to the lender. The
amount cancelled may not exceed the amount of the refund that the
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SFA - Reauthorization 1998: Change dent Financial Assistance Programs
http://www.ed.gov/offices/OSFAP/Students/fishea.html
school should have made.
Loan Default Timeframe Extended Under the new law, a Stafford,
PLUS, or Consolidation loan that is repayable in monthly installments
must be delinquent for 270 days before it can be declared to be in
default. (Previously, a loan defaulted when the borrower did not make
payments for 180 days.)
More about eligibility The law suspends student aid eligibility for
students convicted of certain drug-related offenses. A student who is
convicted under federal or state law of drug possession be ineligible
for one year after the first offense, and two years for a second
offense.
If the student is convicted for selling drugs, he or she will
be ineligible for two years for a first offense, and indefinitely for a
second offense. Federal Pell Grants will no longer be available at
schools that have lost their eligibility to make Stafford and PLUS
Loans because the school has a high number of borrowers in
default. (If a school's default rate is 25% or greater for three
consecutive years, it is subject to loss of eligibility for the Stafford and
PLUS Loan Programs.)
Applying for Student Aid The law now allows a school to include
a reasonable allowance in the student's cost of attendance for the
documented rental or purchase of a personal computer.
Previously, the law set minimum amounts schools could use in the
room and board allowance for students not living in school housing.
These minimums for off-campus housing are now eliminated; the
school determines the amounts.
The Expected Family Contribution
(EFC) formula has been modified by increasing the income
protection allowances for both dependent and independent
students. The increase in the protection allowance means that
students will be expected to contribute less of their income towards
college expenses.
The EFC is no longer automatically reduced if
one of the student's parents is attending college.
However, a school
may, on a case-by-case basis, make adjustments to take into account
the costs of a parent going to college. The law now gives examples of
some of the circumstances under which a financial aid
administrator may adjust EFC data elements -- for instance, the
EFC may be adjusted to consider the family's elementary and
secondary tuition expenses, their medical and dental expenses not
paid for by insurance, unusually high child care expenses, a family
member's recent unemployment, a parent's own education expenses,
or other changes in a family's income, a family's assets, or a student's
status.
The Department will verify the immigration status and
Social Security Number for parents who are applying for PLUS
Loans. This verification will take place through the same tape matches
with the Social Security Administration and the Immigration and
Naturalization Service that are used to verify student application
information.
State Program Name Change The State Student Incentive Grant
(SSIG) Program -- which is a federal and state partnership -- will now
be called Leveraging Educational Assistance Partnership (LEAP)
Program.
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http://www.ed.gov/offices/OSFAP/Students/fishea.lntml
This page last updated March 5, 1999 (Imh).
Student Financial Assistance Programs
U.S. Department of Education
Federal Pell Grants
Federal Supplemental Educational
Opportunity Grants Federal Work Study
Federal Perkins Loans
Federal Stafford Loans
Federal PLUS Loans
What's New I Finding Out About Financial Aid I Applying For Federal Student Aid I Paying Back Your
Student Loan I Help I SFA Home Page I ED Home Page
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The HOPE Scholarship and Lifetime Learning Credits
http://www.ed.gov/offices/OPE/PPI/HOPE/
OFFICE OF
POSTSECONDARY
EDUCATION
U.S. Department of Education
The HOPE Scholarship and Lifetime Learning Credits
Letter from Secretary Riley to College Presidents
Families' Guide to the 1997 Tax Cuts for Education
IRS Notice 97-60: Questions and Answers
IRS Notice 97-73: Returns Relating to Higher Education and Related Expenses
IRS Notice 98-7: Returns Relating to Interest on Education Loans
Applicability of the Family Educational Rights and Privacy Act (FERPA)
IRS Publication 970: Tax Benefits for Higher Education (in portable document format (147K) - requires
Adobe Acrobat Reader)
Balanced Budget Act of 1997
Taxpayer Relief Act of 1997
"A balanced budget that honors our values,
invests in our people, and cuts taxes for middle class families."
Bill Clinton
Background:
On August 5, 1997 the President signed both the Balanced Budget Act of 1997 and the Taxpayer Relief
Act of 1997. The Taxpayer Relief Act of 1997 provides for the HOPE Scholarship and Lifetime
Learning Credits and opens the doors of college to a new generation, with the largest investment in
higher education since the G.I. Bill 50 years ago. The IRS has published Notice 97-60: Questions and
Answers to provide guidance on the higher education tax incentives enacted by the Taxpayer Relief Act
of 1997 (Pub. L. No. 105-34, 111 Stat. 788) (TRA '97). The Families' Guide to the 1997 Tax Cuts for
Education provides additional information to students and parents on these new tax cuts as well.
The centerpiece of President Clinton's budget and middle class tax cut proposal has been promoting
expanded educational opportunity. The President has long understood that our changing economy
demands that people have opportunities to enhance their skills throughout their working lives. This is
why the President insisted that, in addition to the HOPE Scholarship for the first two years of college,
the tax bill must include a tax benefit for lifetime learning. The Taxpayer Relief Act of 1997 enacts the
President's proposals. When fully phased in, 13.1 million students--5.9 million claiming the HOPE
Scholarship, and 7.2 million claiming the Lifetime Learning Credit--are expected to benefit each year.
Overview:
$1,500 HOPE Scholarship to make the first two years of college universally available. For students
in the first two years of college (or other eligible post-secondary training), taxpayers will be eligible for
a tax credit equal to 100% of the first $1,000 of tuition and fees and 50% of the second $1,000 (the
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The HOPE Scholarship and Lifetime Learning Credits
http://www.ed.gov/oftices/OPE/PPI/HOPE/
amounts are indexed for inflation after 2001). The credit will be available on a per-student basis for net
tuition and fees (less grant aid) paid for college enrollment after December 31, 1997. The credit is
phased out for joint filers between $80,000 and $100,000 of income, and for single filers between
$40,000 and $50,000 (indexed after 2001). The credit can be claimed in two taxable years (but not
beyond the year when the student completes the first two years of college) with respect to any individual
enrolled on at least a half-time basis for any portion of the year.
Lifetime Learning Credit for College Juniors, Seniors, Graduate Students and working
Americans pursuing lifelong learning to upgrade their skills. For those beyond the first two years of
college, or taking classes part-time to improve or upgrade their job skills, the family will receive a 20%
tax credit for first $5,000 of tuition and fees through 2002, and for the first 10,000 thereafter. The credit
is available for net tuition and fees (less grant aid) paid for post-secondary enrollment after June 30,
1998. The credit is available on a per-taxpayer (family) basis, and is phased out at the same income
levels as the HOPE Scholarship.
Education Savings Accounts. For each child under age 18, families may deposit $500 per year into an
Education IRA. Earnings would accumulate tax-free and no taxes will be due upon withdrawal for net
post-secondary expenses for tuition, fees, books, equipment, and room and board. The Education IRA is
phased out for families with incomes between $150,000 and $160,000, and for single filers between
$95,000 and $110,000. A taxpayer who uses tax-free distributions from an Education IRA may not, in
the same year, benefit from the HOPE Scholarship or Lifetime Learning Credit.
Student Loan Interest Deduction. Allows an above-the-line deduction (the taxpayer does not need to
itemize in order to benefit) for interest paid in the first 60 months of repayment on private or
government-backed loans, post-secondary education and training expenses. The maximum deduction is
$1,000 in 1998, $1,500 in 1999, $2,000 in 2000, and $2,500 in 2001 and beyond. It is phased out for
joint filers with incomes between $60,000 and $75,000, and to single filers with incomes between
$40,000 and $55,000 (indexed after 2002). The deduction is available for loans made before or after
enactment of this provision, but only to the extent that the loan is within the first 60 months of
repayment. The loan amount eligible for the deduction is limited to post-secondary expenses for tuition,
fees, books, equipment, room, and board.
IRA Withdrawals. Taxpayers may withdraw funds from an IRA, without penalty, for the higher
education expenses of the taxpayer, spouse, child, or grandchild. The amount that can be withdrawn
without penalty is limited to net post-secondary expenses for tuition, fees, books, equipment, and room
and board.
Employer-Provided Education Benefits. Extends Section 127 of the tax code for undergraduates for
three years (for courses beginning prior to June 1, 2000). This provision allows workers to exclude up to
$5,250 of employer-provided education benefits from their taxable income.
Community Service Loan Forgiveness. Excludes from taxable income loan amounts forgiven by
non-profit, tax-exempt charitable or educational institutions for borrowers who take community-service
jobs addressing unmet needs.
Expand benefits for pre-paid tuition plans. Allows State-sponsored pre-paid tuition plans -- the
earnings from which not taxed until the time of withdrawal as a result of last year's tax bill to include
room and board expenses for students who attend on at least a half-time basis. Withdrawals are eligible
for the HOPE Scholarship and Lifetime Learning tax credits.
Repeal Cap on Tax Exempt Bond Issuance by Colleges and Universities. Repeals the $150 million
bond cap that affects private higher education institutions and certain other charitable institutions. The
repeal applies to tax-exempt bonds issued by these institutions to finance new capital expenditures.
To learn more about other Federal financial aid programs, check out the Student Guide on the Office of Postsecondary
Education web site.
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The HOPE Scholarship and Lifetime Learning Credits
http://www.ed.gov/offices/OPE/PPI/HOPE/
Department of Education
OFFICE OF
Office of Postsecondary Education
POSTSECONDARY
Regional Office Building 3 (ROB-3)
EDUCATION
7th and D Streets, SW
Washington, DC 20202
Comments
This page last updated April 12, 1999 [saw]
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HOPE- Letter from Secretary Riley to University Presidents
http://www.ed.gov/offices/OPE/PPI/HOPE/dearpr.html
OF
STATES
UNITED STATES DEPARTMENT OF EDUCATION
THE SECRETARY
UNITED
December 3, 1998
Dear President:
I am writing to seek your assistance to ensure that your students and their families fully achieve the
benefits of the Hope Scholarship and Lifetime Learning tax credits.
On August 5, 1997, President Clinton signed both the Balanced Budget Act of 1997 and the Taxpayer
Relief Act of 1997. These historic legislative accomplishments put the Nation's financial house in order
while providing needed, targeted tax relief for America's working families struggling to pay for college.
The President's Hope Scholarship and Lifetime Learning tax credits, which are worth up to $1,500 for
each student and $1,000 per family, respectively, will help taxpayers pay college expenses for
themselves and their children.
In developing these tax credits, we wanted to ensure that they would provide additional help for families
to pay for college and not simply substitute for existing sources of financial assistance. At the Federal
level, we did not want to force any student to lose a Pell Grant, for example, as a result of benefiting
from a tax credit. Consequently we proposed, and the Congress enacted last year, a change to the
eligibility formulas to ensure that receipt of a Hope Scholarship or Lifetime Learning tax credit would
not reduce any student's eligibility for Federal student financial assistance. Similarly, we hope that these
tax benefits will not be shifted from families to colleges and universities through increased tuition
charges.
Therefore, I urge colleges, universities, and State legislatures to follow our lead in ensuring that the new
tax credits truly reduce families' college expenses, and I see encouraging signs that this will happen.
First, a number of institutions have announced that they will not reduce institutional financial aid awards
to students whose families benefit from the tax credits, while others have plans to increase aggregate
institutional aid for low-income as well as middle-income students. Second, the recent College Board
report indicates that this year's tuition increases will average about four percent, continuing the recent
trend of smaller annual tuition increases even though the new tax credits are now in place. Third, a
number of States are developing, as Massachusetts already has, a comprehensive plan of reduced tuition
charges, increased grant aid, and Federal tax credits to make community college free, or nearly free, for
most students.
I am optimistic that more colleges, universities, and State legislatures will take similar steps, and I am
counting on you to help ensure that America's families receive the benefits intended for them from the
Hope Scholarship and Lifetime Learning tax credits.
Yours sincerely,
Richard W. Riley
-###-
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Families' Guide to the 1997 Tax Cuts for Education -- September 17, 1997
http://www.ed.gov/offices/OPE/Students/hopegd.html
Families' Guide
to the 1997 Tax Cuts for Education
Hope Scholarship tax credit for students starting college (first two years/vocational study)
Lifetime learning tax credit (juniors, seniors, graduate/professional, and adult learners)
Education IRAs and withdrawals from other IRAs (parents and grandparents)
Greater flexibility for families saving in State tuition plans
Paying back student loans at a lower cost
Going to school while you work Community service loan forgiveness
Many new tax benefits for adults who want to return to school and for parents who are
sending or planning to send their children to college will be available due to the balanced
budget signed into law in August, 1997. These tax cuts effectively make the first two years of
college universally available, and they will give many more working Americans the financial
means to go back to school if they want to choose a new career or upgrade their skills. When
fully phased in, 12.9 million students are expected to benefit 5.8 million under the "HOPE
Scholarship" tax credit, and 7.1 million under the Lifetime Learning tax credit.
Up to a $1,500 "HOPE Scholarship" tax credit for students starting college
The "HOPE Scholarship" tax credit helps make the first two years of college or vocational
school universally available. Students will receive a 100% tax credit for the first $1,000 of
tuition and required fees and a 50% credit on the second $1,000. This credit is available for
tuition and required fees less grants, scholarships, and other tax-free educational assistance
and will be available for payments made after December 31, 1997 for college enrollment after
that date. A high school senior going into his or her freshman year of college in September,
1998, for example, could be eligible for as much as a $1,500 HOPE tax credit.
This credit is phased out for joint filers who have between $80,000 and $100,000 of adjusted
gross income, and for single filers who have between $40,000 and $50,000 of adjusted gross
income. The credit can be claimed in two years for students who are in their first two years of
college or vocational school and who are enrolled on at least a half-time basis in a degree or
certificate program for any portion of the year. The taxpayer can claim a credit for his own
tuition expense or for the expenses of his or her spouse or dependent children.
A married couple with an adjusted gross income of $60,000 has two children
in college at least half-time, one at a community college with a tuition of $2,000
and the other a sophomore at a private college with tuition of $11,000. Using the
HOPE Scholarship tax credit, this couple would have their taxes cut by as much as
$3,000.
The Lifetime Learning tax credit
This tax credit is targeted to adults who want to go back to school, change careers, or take a
course or two to upgrade their skills and to college juniors, seniors, graduate and professional
degree students. A family will receive a 20% tax credit for the first $5,000 of tuition and
required fees paid each year through 2002, and for the first $10,000 thereafter. Just like the
"HOPE Scholarship" tax credit, the Lifetime Learning tax credit is available for tuition and
required fees less grants, scholarships, and other tax-free educational assistance; families
may claim the credit for amounts paid on or after July 1, 1998 for college or vocational school
enrollment beginning on or after July 1, 1998. The maximum credit is determined on a
per-taxpayer (family) basis, regardless of the number of post-secondary students in the family,
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and is phased out at the same income levels as the "HOPE Scholarship" tax credit. Families
will be able to claim the Lifetime Learning tax credit for some members of their family and the
"HOPE Scholarship" tax credit for others who qualify in the same year.
A homemaker, whose family has an adjusted gross income of $70,000, wants to
attend a graduate teacher training program at a public university ($3,500 tuition)
after being out of college for 20 years. Using the Lifetime Learning credit, her
family's income taxes would be cut by as much as $700.
A married couple has an adjusted gross income of $32,000. The husband who is
working as an automobile mechanic decides to go back to a local technical
college to take some computer classes in the hope of getting a better job. He will
pay a tuition of $1,200. Using the Lifetime Learning credit, this family would have
their taxes cut by as much as $240.
Parents and grandparents can create education IRAs and make penalty-free
withdrawals from other IRAs
Beginning January 1, 1998, taxpayers may withdraw funds from an IRA, without penalty, for
their own higher education expenses or those of their spouse, child, or even grandchild. In
addition, for each child under age 18, families may deposit $500 per year into an Education
IRA in the child's name. Earnings in the Education IRA will accumulate tax-free and no taxes
will be due upon withdrawal if the money is used to pay for post-secondary tuition and required
fees (less grants, scholarships, and other tax-free educational assistance), books, equipment,
and eligible room and board expenses. Once the child reaches age 30, his or her Education
IRA must be closed or transferred to a younger member of the family.
A taxpayer's ability to contribute to an Education IRA is phased out when the taxpayer is a
joint filer with an adjusted gross income between $150,000 and $160,000, or a single filer with
an adjusted gross income between $95,000 and $110,000. There are a few restrictions. A
student, for example, who receives the tax-free distributions from an Education IRA may not,
in the same year, benefit from the "HOPE Scholarship" or Lifetime Learning tax credits.
Greater flexibility for families saving in qualified State tuition plans
When a family uses a qualified State-sponsored tuition plan to save for college, no tax is due
in connection with the plan until the time of withdrawal as a result of a law passed last year.
This year's change in law allows families to use these plans to save not only for tuition but also
for certain room and board expenses for students who attend on at least a half-time basis.
Tuition and required fees paid with withdrawals from a qualified State tuition plan are eligible
for the "HOPE Scholarship" tax credit and Lifetime Learning tax credit. These benefits are
available on January 1, 1998.
Paying back student loans at a lower cost
For many college graduates, one of their first financial obligations is to repay their student
loans, which average about $13,500 per student. The new student loan interest deduction will
reduce the burden of the repayment obligation by allowing students or their families to take a
tax deduction for interest paid in the first 60 months of repayment on student loans. The
deduction is available even if an individual does not itemize other deductions.
The maximum deduction is $1,000 in 1998, $1,500 in 1999, $2,000 in 2000, and $2,500 in
2001 and beyond. It is phased out for joint filers with adjusted gross income between $60,000
and $75,000, and single filers with adjusted gross income between $40,000 and $55,000. The
deduction is available for all educational loans, including loans made to students, parents,
guaranteed student loans, and loans from private lenders, made before August of 1997 when
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the new student loan interest deduction became law but only to the extent that the loan is
within the first 60 months of repayment.
A senior graduates from college and finds a job paying $25,000 a year (and has
no other income). The student has a total student debt of $12,000 and is in the
15% federal income tax bracket. The monthly payment for this student's loans is
$148. The total amounts of payments for the first year is $1,776, over half of which
is interest ($960) which can be deducted under the new law. The student's
maximum tax benefit can be calculated by multiplying $960 by 15%: for a tax
savings of $144.
Going to school while you work
The new tax law extends Section 127 of the tax code for three years. Section 127 allows
workers to exclude up to $5,250 of employer-provided education benefits from their income.
The assistance must be for undergraduate courses beginning prior to June 1, 2000. This
provision will enable many Americans to pursue their goals of lifelong learning.
Community service loan forgiveness
This provision excludes from income student loan amounts forgiven by non-profit, tax-exempt
charitable or educational institutions for borrowers who take community-service jobs that
address unmet community needs. For example, a recent graduate who takes a low-paying job
in a rural school will not owe any additional income tax if in recognition of this service her
college or another charity forgives a loan it made to her to help pay her college costs. This
provision applies to loans forgiven after August 5, 1997.
The balanced budget bills signed by President Clinton include many other provisions that will
help all of the young people in America grow and learn and help families navigate through
these changing times. The new tax law includes a provision to encourage computer donations
to schools. The balanced budget agreement protects and advances President Clinton's top
domestic priorities, such as expansion of Head Start, and an increase in the maximum Pell
grant for college to $3,000. All of these benefits and tax cuts have one goal: to give parents
the support they need to give their children a first class education and hope for the future.
For information on additional student aid programs that will help meet the costs of college and
lifelong learning for you, your children and grandchildren, please call 1-800-4FED-AID. For
information on the importance of getting ready for college early, especially middle school
students, call 1-800-USA-LEARN.
(This is an informational guide produced by the Department of Education;
for detailed tax information and instruction please consult your
IRS tax forms and publications to see if you qualify.)
-###-
Last updated: September 29, 1997 by [lh/SFAP]
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Finding Out About Financial Aid
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Notice 97-60: Questions and Answer ut the Taxpayer Relief Act of 1997
http://www.ed.gov/inits/hope/tax_qa/
Part III - Administrative, Procedural, and Miscellaneous
Education Tax Incentives
Notice 97-60
Purpose
Discussion
Section 1. The HOPE Scholarship Credit
Section 2. Lifetime Learning Credit
Section 3. Education IRAs
Section 4. Using IRA Withdrawals to Pay Higher Education Expenses
Section 5. Student Loan Interest Deduction
Section 6. Qualified State Tuition Programs
Section 7. Exclusion for Employer-Provided Educational Assistance
Further Information
Drafting Information
-###-
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Section 1: Q and A About the Taxpayer Relief of 1997
http://www.ed.gov/inits/hope/tax_qa/sec1.htm
Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Discussion
Section 1. The HOPE Scholarship Credit
Beginning January 1, 1998, taxpayers may be eligible to claim a nonrefundable Hope Scholarship Credit
against their federal income taxes. The Hope Scholarship Credit may be claimed for the qualified tuition
and related expenses of each student in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or
an eligible dependent) who is enrolled at least half-time in one of the first two years of postsecondary
education and who is enrolled in a program leading to a degree, certificate, or other recognized
educational credential. The amount that may be claimed as a credit is generally equal to: (1) 100 percent
of the first $1,000 of the taxpayer's out-of-pocket expenses for each student's qualified tuition and related
expenses, plus (2) 50 percent of the next $1,000 of the taxpayer's out-of-pocket expenses for each
student's qualified tuition and related expenses. Thus, the maximum credit a taxpayer may claim for a
taxable year is $1,500 multiplied by the number of students in the family who meet the enrollment
criteria described above.
The amount a taxpayer may claim as a Hope Scholarship Credit is gradually reduced for taxpayers who
have modified adjusted gross income between $40,000 ($80,000 for married taxpayers filing jointly) and
$50,000 ($100,000 for married taxpayers filing jointly). Taxpayers with modified adjusted gross income
over $50,000 ($100,000 for married taxpayers filing jointly) may not claim the Hope Scholarship Credit.
Both the dollar limitation on the expenses for which the credit may be claimed and the modified adjusted
gross income limitation will be indexed for inflation in 2002 and years thereafter. The Hope Scholarship
Credit may be claimed for payments of qualified tuition and related expenses made on or after January 1,
1998, for academic periods beginning on or after January 1, 1998. Therefore, the first time taxpayers
will be able to claim the credit is when they file their 1998 tax returns in 1999. The Hope Scholarship
Credit is not available for any amount paid in 1997.
Q1: Who may claim the Hope Scholarship Credit?
A1: An individual paying qualified tuition and related expenses at a postsecondary educational
institution may claim the credit, provided the student whose expenses are being paid and the institution
meet certain eligibility requirements.
Q2: May an individual claim a Hope Scholarship Credit for paying qualified tuition and related
expenses for other family members?
A2: Yes. An individual may claim the credit for his/her own qualified tuition and related expenses and
the qualified tuition and related expenses of his/her spouse and other eligible dependents (including
children) for whom the dependency exemption is claimed. Generally, a parent may claim the
dependency exemption for his/her unmarried child if: (1) the parent supplies more than half the child's
support for the taxable year, and (2) the child is under age 19 or is a full-time student under age 24.
Q3: What are the eligibility requirements for the student?
A3: A student is eligible for the Hope Scholarship Credit if: (1) for at least one academic period (e.g.,
semester, trimester, quarter) beginning during the calendar year, the student is enrolled at least half-time
in a program leading to a degree, certificate, or other recognized educational credential and is enrolled in
one of the first two years of postsecondary education, and (2) the student is free of any conviction for a
Federal or State felony offense consisting of the possession or distribution of a controlled substance. For
purposes of the Hope Scholarship Credit, a student will be considered to be enrolled at least half-time if
the student is enrolled for at least half the full-time academic workload for the course of study the
student is pursuing as determined under the standards of the institution where the student is enrolled.
The institution's standard for a full-time workload must equal or exceed the standards established by the
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Section 1: Q and A About the Taxpayer Relief of 1997
http://www.ed.gov/inits/hope/tax_qa/secl.htm
Department of Education under the Higher Education Act and set forth in 34 C.F.R. § 674.2(b).
Q4: What are the eligibility requirements for the institution?
A4: The college, university, vocational school, or other postsecondary educational institution where the
student is enrolled must be an institution that is described in section 481 of the Higher Education Act of
1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by
the Department of Education. This category includes virtually all accredited public, nonprofit, and
proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the
Lifetime Learning Credit, described in the next section.)
Q5: The Hope Scholarship Credit may be claimed only for amounts spent on "qualified tuition
and related expenses." Which expenses are included in qualified tuition and related expenses?
A5: The term "qualified tuition and related expenses" means the tuition and fees an individual is
required to pay in order to be enrolled at or attend an eligible institution. Amounts paid for any course or
other education involving sports, games, or hobbies are not eligible for the credit, unless the course or
other education is part of the student's degree program. Charges and fees associated with room, board,
student activities, athletics, insurance, books, equipment, transportation, and similar personal, living, or
family expenses are not qualified tuition or related expenses. (The same definition of "qualified tuition
and related expenses" applies for the Lifetime Learning Credit, described in the next section.)
Q6: The Hope Scholarship Credit is available only if a taxpayer's "modified adjusted gross
income" is below a specified amount. How does a taxpayer know what his/her modified adjusted
gross income is?
A6: For most taxpayers, modified adjusted gross income is the same as adjusted gross income.
Taxpayers compute adjusted gross income as part of completing a Federal income tax return. For those
few taxpayers who earn income abroad or receive income from certain American territories or
possessions, modified adjusted gross income will be greater than adjusted gross income. In those cases,
the individual's adjusted gross income will be increased by: (1) certain amounts that the individual earns
abroad, (2) amounts effectively connected with the individual's conduct of a trade or business or derived
from sources in Guam, American Samoa, or the Northern Mariana Islands (if the individual is a resident
of the possession where the source of the income is located), and (3) amounts derived from sources in
Puerto Rico (if the individual is a Puerto Rican resident). (The same rules apply for the Lifetime
Learning Credit, described in the next section.)
Q7: May a nonresident alien claim the Hope Scholarship Credit?
A7: Generally no. There is an exception for certain nonresident aliens who are married to U.S. citizens
or resident aliens. Nonresident aliens should consult a U.S. tax advisor to determine whether the
exception applies to them. (The same rules apply to the Lifetime Learning Credit, described in the next
section.)
Q8: Are qualified tuition and related expenses for graduate-level degree work eligible for the
Hope Scholarship Credit?
A8: No. However, the Lifetime Learning Credit is available for these expenses (See Sec. 2, Q&A5.)
Q9: May an individual claim a Hope Scholarship Credit for more than one family member?
A9: Yes. Furthermore, the credit is calculated on a per student, rather than a per family, basis. For
example, if an individual whose modified adjusted gross income is $35,000 pays over $2,000 in
qualified tuition and related expenses for himself and over $2,000 in qualified tuition and related
expenses for his dependent child, and both he and his dependent child meet the eligibility requirements,
the individual may claim a Hope Scholarship Credit of $3,000 (i.e., a credit of $1,500 for his expenses
plus a credit of $1,500 for his child's expenses).
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Q10: May both the parent and a dependent child claim the Hope Scholarship Credit for the
child's qualified tuition and related expenses in the same year?
A10: No. Either the parent or the child, but not both, may claim the credit for the child's expenses in a
particular year. If an individual claims the child as a dependent on his/her Federal income tax return for
the year, only the individual may claim the Hope Scholarship Credit for the child's qualified tuition and
related expenses. If no one claims the child as a dependent on a Federal income tax return for the year,
only the child may claim the Hope Scholarship Credit for the child's expenses. (The same rules relating
to individuals and dependents apply for the Lifetime Learning Credit, described in the next section.)
Q11: If a married taxpayer files a separate return, may the taxpayer claim a Hope Scholarship
Credit on his/her income tax return?
A11: No. Married taxpayers may claim the credit only if the taxpayer and the taxpayer's spouse file a
joint return for the taxable year. (The same rules apply for the Lifetime Learning Credit, described in the
next section.)
Q12: How does a parent claim a Hope Scholarship Credit for the qualified tuition and related
expenses of a dependent child?
A12: The parent may claim the credit on his/her tax return even if the child files his/her own tax return.
When a child is claimed as a dependent on a parent's return, any qualified tuition or related expenses
paid by the child during the year are treated as if the parent had paid them. Therefore, these expenses are
included in calculating the parent's Hope Scholarship Credit. A child may not claim a Hope Scholarship
Credit on his/her tax return for a particular year if the child's parent claims the child as a dependent in
that same year. (The same rules apply for the Lifetime Learning Credit, described in the next section.)
Q13: What is the maximum Hope Scholarship Credit a taxpayer may claim for an eligible
student?
A13: Until 2002 (when the dollar limitations are indexed for inflation), for each student who meets the
eligibility requirements, the credit amount is 100 percent of the first $1,000 of the taxpayer's
out-of-pocket expenses for qualified tuition and related expenses, plus 50 percent of the next $1,000 of
the taxpayer's out-of-pocket expenses for qualified tuition and related expenses. Therefore, the
maximum credit amount for the expenses of an eligible student is $1,500. If the taxpayer is claiming a
credit for more than one person, the credit amount for each student in the taxpayer's family is added
together to determine the maximum total credit the taxpayer may claim.
Q14: The amount a taxpayer may claim as a Hope Scholarship Credit is gradually reduced for
taxpayers with modified adjusted gross income between $40,000 and $50,000 (between $80,000
and $100,000 for married taxpayers filing jointly). How does this reduction work?
A14: The reduction works on a sliding scale that reflects where the taxpayer's modified adjusted gross
income is in the phase-out range. For example, until 2002 (when the dollar limitations on the credit and
the income ranges are indexed for inflation), if an eligible student (who is not anyone's dependent for tax
purposes) pays $2,000 or more in qualified tuition and related expenses in a particular year, and the
student's modified adjusted gross income for the year is $45,000 (half way along the $10,000 phase-out
range), the credit amount for the student is limited to $750. By contrast, if the same student's modified
adjusted gross income was $35,000, the credit amount for the student would be the maximum $1,500.
Q15: How does a taxpayer claim the Hope Scholarship Credit?
A15: The first year that the credit will be available is 1998. Thus, taxpayers will not be able to claim the
credit until they file their 1998 tax returns in 1999. Instructions accompanying the 1998 tax forms (for
returns required to be filed in 1999) will explain how to calculate the credit and how to claim it on the
tax return.
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http://www.ed.gov/inits/hope/tax_qa/secl.html
Q16: Is there a limit to the number of times a taxpayer may claim the Hope Scholarship Credit for
each student?
A16: Yes. The credit may be claimed in no more than two years for each student. Thus, for example, a
couple with a child who starts as a freshman in the fall of 1998, continues as a sophomore in 1999, and
meets the eligibility requirements may claim the credit for their child's expenses in 1998 and again in
1999. After 1999, neither the parents, the student, nor anyone else may claim any additional Hope
Scholarship Credits for this student's qualified tuition and related expenses. However, in 2000 and
thereafter, the Lifetime Learning Credit may be available for this child's expenses. Furthermore, if the
couple has another child who starts as a freshman in the fall of 1999, the couple may claim the Hope
Scholarship Credit for that child's expenses in 1999 and one additional year.
Q17: May an individual claim both the Hope Scholarship Credit and the Lifetime Learning Credit
for a student's expenses in a single taxable year?
A17: No. For each year in which a student meets the eligibility requirements for the Hope Scholarship
Credit, the student's expenses may be used as the basis for a Hope Scholarship Credit or a Lifetime
Learning Credit, but not both. If, for example, an eligible student pays more than $2,000 in qualified
tuition and related expenses during the calendar year, the student (or the individual claiming the student
as a dependent) may not claim the Hope Scholarship Credit for the first $2,000 of expenses and the
Lifetime Learning Credit for the rest.
Q18: If a couple has two children, one who is a freshman and one who is a junior, may the couple
claim a Hope Scholarship Credit for the freshman's expenses and a Lifetime Learning Credit for
the junior's expenses?
A18: Yes. Assuming the applicable eligibility requirements have been met for each credit, a taxpayer
may claim the Hope Scholarship Credit for one student's expenses and the Lifetime Learning Credit for
another student's expenses in the same year.
Q19: May a parent or student claim a Hope Scholarship Credit for tuition paid in advance of
when the academic period begins?
A19: Generally, the credit is available only for payments of qualified tuition and related expenses that
cover an academic period beginning in the same calendar year as the payment is made. (An academic
period begins on the first day of classes, and does not include periods of orientation, counseling, or
vacation.) An exception, however, allows a parent or student to claim a Hope Scholarship Credit for
payments of qualified tuition and related expenses made during the calendar year to cover an academic
period that begins in January, February, or March of the following taxable year. Because the Hope
Scholarship Credit does not apply to expenses paid before January 1, 1998, this exception does not
apply to tuition paid in 1997 to cover academic periods beginning in 1998.
Q20: If a student (who is not claimed as a dependent on anyone's Federal income tax return) pays
qualified tuition and related expenses using a combination of a Pell Grant, a loan, a gift from a
family member, and some personal savings, what expenses may be taken into account in
calculating the Hope Scholarship Credit the student may claim?
A20: The student may take into account only "out-of-pocket" expenses in calculating the credit.
Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an inheritance, or
personal savings (including savings from a qualified state tuition program) are taken into account in
calculating the credit amount. However, qualified tuition and related expenses paid with a Pell Grant or
other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free employer-provided
educational assistance are not taken into account in calculating the credit amount. (The same rules apply
for the Lifetime Learning Credit, described in the next section.)
Q21: May a student's parents claim the Hope Scholarship Credit for the student's expenses for a
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taxable year in which the student takes money out of an Education IRA on a tax-free basis?
A21: No. If a student is receiving a tax-free distribution from an Education IRA in a particular taxable
year, none of that student's expenses may be claimed as the basis for a Hope Scholarship Credit for that
taxable year. However, the student may waive the tax-free treatment of the Education IRA distribution
and elect to pay any tax that would otherwise be owed on the Education IRA distributions received in
any taxable year so that the student or the student's parents may claim a Hope Scholarship Credit for
expenses paid in the same year the Education IRA distributions are received.
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Section 2: Q and A About the Taxpayer Relief Act of 1997
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Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Section 2. Lifetime Learning Credit
Beginning on July 1, 1998, taxpayers may be eligible to claim a nonrefundable Lifetime Learning Credit
against their federal income taxes. The Lifetime Learning Credit may be claimed for the qualified tuition
and related expenses of the students in the taxpayer's family (i.e., the taxpayer, the taxpayer's spouse, or
an eligible dependent) who are enrolled in eligible educational institutions. Through 2002, the amount
that may be claimed as a credit is equal to 20 percent of the taxpayer's first $5,000 of out-of-pocket
qualified tuition and related expenses for all the students in the family. After 2002, the credit amount is
equal to 20 percent of the taxpayer's first $10,000 of out-of-pocket qualified tuition and related expenses.
Thus, the maximum credit a taxpayer may claim for a taxable year is $1,000 through 2002 and $2,000
thereafter. These amounts are not indexed for inflation.
If the taxpayer is claiming a Hope Scholarship Credit for a particular student, none of that student's
expenses for that year may be applied toward the Lifetime Learning Credit. The amount a taxpayer may
claim as a Lifetime Learning Credit is gradually reduced for taxpayers who have modified adjusted gross
income between $40,000 ($80,000 for married taxpayers filing jointly) and $50,000 ($100,000 for
married taxpayers filing jointly). Taxpayers with modified adjusted gross income over $50,000
($100,000 for married taxpayers filing jointly) may not claim a Lifetime Learning Credit. The modified
adjusted gross income limitation will be indexed for inflation in 2002 and years thereafter. The
definition of modified adjusted gross income is the same as it is for purposes of the Hope Scholarship
Credit. (See Sec. 1, Q&A6.)
The Lifetime Learning Credit may be claimed for payments of qualified tuition and related expenses
made on or after July 1, 1998, for academic periods beginning on or after July 1, 1998. Therefore, the
first time taxpayers will be able to claim the credit will be when they file their 1998 tax returns in 1999.
The Lifetime Learning Credit is not available for any amount paid in 1997.
Q1: Who may claim the Lifetime Learning Credit?
A1: An individual paying qualified tuition and related expenses at a postsecondary educational
institution may claim the credit, provided the institution is an eligible educational institution. Unlike the
Hope Scholarship Credit, students are not required to be enrolled at least half-time in one of the first two
years of postsecondary education. Nonresident aliens generally are not eligible to claim the Lifetime
Learning Credit. (See Sec. 1, Q&A7.)
Q2: May an individual claim a Lifetime Learning Credit for paying qualified tuition and related
expenses for other family members?
A2: Yes. An individual may claim the credit for his/her own qualified tuition and related expenses and
the qualified tuition and related expenses of his/her spouse and other eligible dependents (including
children) for whom the dependency exemption is allowed. Generally, a parent may claim the
dependency exemption for his/her unmarried child if: (1) the parent supplies more than half the child's
support for the taxable year, and (2) the child is under age 19 or is a full-time student under age 24.
Q3: What are the eligibility requirements for the institution?
A3: They are the same requirements that apply for the Hope Scholarship Credit. (See Sec. 1, Q&A4.)
Q4: Is the Lifetime Learning Credit available for a student taking only one course?
A4: Yes. For example, a student who has just graduated from high school and is taking a single course at
a community college may claim the Lifetime Learning Credit if the student comes within the income
limits and is not claimed as a dependent by someone else.
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Q5: Are qualified tuition and related expenses for graduate-level education eligible for the
Lifetime Learning Credit?
A5: Yes.
Q6: May an individual claim a Lifetime Learning Credit for more than one family member?
A6: Yes. However, unlike the Hope Scholarship Credit, the Lifetime Learning Credit is calculated on a
per family, rather than a per student, basis. Therefore, the maximum available credit does not vary with
the number of students in the family. For example, if in 1999 a married individual whose modified
adjusted gross income is $35,000 pays $5,000 of qualified tuition and related expenses to attend an
eligible educational institution, the individual may claim a $1,000 Lifetime Learning Credit. If in the
same year the individual also pays another $2,000 in qualified tuition and related expenses for his spouse
to attend an eligible educational institution, the individual's Lifetime Learning Credit is still $1,000.
Q7: May both the parent and a dependent child claim the Lifetime Learning Credit for the child's
qualified tuition and related expenses in the same year?
A7: No. Either the parent or the child, but not both, may claim the credit for the child's expenses in a
particular year. If an individual claims the child as a dependent on his/her Federal income tax return for
the year, only the individual may claim the Lifetime Learning Credit for the child's qualified tuition and
related expenses. If no one claims the child as a dependent on a Federal income tax return for the year,
only the child may claim the Lifetime Learning Credit for the child's expenses.
Q8: How does a parent claim a Lifetime Learning Credit for the qualified tuition and related
expenses of a dependent child?
A8: The parent may claim the credit on his/her Federal income tax return even if the child files his/her
own tax return. When a child is claimed as a dependent on the parent's return, any qualified tuition and
related expenses paid by the child during the year are treated as if the parent had paid them and,
therefore, are included in calculating the parent's Lifetime Learning Credit. A child may not claim a
Lifetime Learning Credit on his/her tax return for any year if the child's parent claims the child as a
dependent in that same year. Also, a married taxpayer who does not file a joint return is not eligible to
claim the Lifetime Learning Credit. (See Sec. 1, Q&A11.)
Q9: What is the maximum Lifetime Learning Credit a taxpayer may claim?
A9: The credit is equal to 20 percent of the taxpayer's out-of-pocket expenses for qualified tuition and
related expenses of all eligible family members, up to a maximum of $5,000 in expenses annually
through 2002. Thus, the maximum Lifetime Learning Credit a taxpayer may claim through 2002 is
$1,000. After 2002, the credit is equal to 20 percent of the taxpayer's out-of-pocket expenses up to a
maximum of $10,000 in expenses. Thus, the maximum Lifetime Learning Credit a taxpayer may claim
after 2002 is $2,000. The maximum credit does not change even if the taxpayer is claiming a credit for
the expenses of more than one student in the family.
Q10: What does the term "qualified tuition and related expenses" mean for purposes of the
Lifetime Learning Credit?
A10: The term "qualified tuition and related expenses" for purposes of the Lifetime Learning Credit has
the same meaning as it does for purposes of the Hope Scholarship Credit. (See Sec. 1, Q&A5.)
Q11: If a student (who is not claimed as a dependent on anyone's Federal income tax return) pays
qualified tuition and related expenses using a combination of a Pell Grant, a loan, a gift from a
family member, and some personal savings, what expenses may be taken into account in
calculating the Lifetime Learning Credit the student may claim?
A11: The student may take into account only "out-of-pocket" expenses in calculating the Lifetime
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Learning Credit. Qualified tuition and related expenses paid with the student's earnings, a loan, a gift, an
inheritance, or personal savings (including savings from a qualified state tuition program) are taken into
account in calculating the credit amount. However, qualified tuition and related expenses paid with a
Pell Grant or other tax-free scholarship, a tax-free distribution from an Education IRA, or tax-free
employer-provided educational assistance are not taken into account in calculating the credit amount.
Q12: How does a taxpayer claim the Lifetime Learning Credit?
A12: The first year that the credit will be available is 1998. Taxpayers will not be able to claim the
credit until they file their 1998 returns in 1999. Instructions accompanying the 1998 tax forms (for
returns required to be filed in 1999) will explain how to calculate the credit and how to claim it on the
tax return.
Q13: Is there a limit on the number of years in which a Lifetime Learning Credit may be claimed,
as there is for the Hope Scholarship Credit?
A13: Unlike the Hope Scholarship Credit, there is no limit to the number of years in which a Lifetime
Learning Credit may be claimed for each student. Thus, for example, an individual who enrolls in one
college-level class every year would be able to claim the Lifetime Learning Credit for an unlimited
number of years, provided the individual meets the income limits and is taking the classes at institutions
that meet the eligibility requirements. (See Q&A3 in this section.)
Q14: May a parent or student claim a Lifetime Learning Credit for tuition paid in advance of
when the academic period begins?
A14: Generally, the credit is available only for payments of qualified tuition and related expenses that
cover an academic period beginning in the same calendar year as the year in which payment is made.
(An academic period begins on the first day of classes, and does not include periods of orientation,
counseling, or vacation.) An exception, however, allows a parent or student to claim a Lifetime Learning
Credit for payments of qualified tuition and related expenses made during the calendar year to cover an
academic period that begins in January, February, or March of the following taxable year. Because the
Lifetime Learning Credit does not apply to expenses paid before July 1, 1998, this exception does not
apply to tuition paid before that date to cover academic periods beginning before or after that date.
Q15: May a student or a student's parents take the Lifetime Learning Credit for the student's
expenses in a taxable year in which the student takes money out of an Education IRA on a tax-free
basis?
A15: No. If a student is receiving a tax-free distribution from an Education IRA in a particular taxable
year, none of that student's expenses may be claimed as the basis for a Lifetime Learning Credit for that
year. However, the student may waive the tax-free treatment of the Education IRA distribution and elect
to pay any tax that would otherwise be owed on the Education IRA distributions so that the student or
the student's parents may claim a Lifetime Learning Credit for expenses paid in the same year the
Education IRA distributions are received.
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Section 3: Q and A About the Taxpayer Relief Act of 1997
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Notice 97-60 Questions and Answers About the Taxpayer Relief Act of 1997
Section 3. Education IRAs
Beginning January 1, 1998, taxpayers may deposit up to $500 per year into an Education IRA for a child
under age 18. Parents, grandparents, other family members, friends, and a child him/herself may
contribute to the child's Education IRA, provided that the total contributions for the child during the
taxable year do not exceed the $500 limit. Amounts deposited in the account grow tax-free until
distributed, and the child will not owe tax on any withdrawal from the account if the child's qualified
higher education expenses at an eligible educational institution for the year equal or exceed the amount
of the withdrawal. If the child does not need the money for postsecondary education, the account balance
can be rolled over to the Education IRA of certain family members who can use it for their higher
education. Amounts withdrawn from an Education IRA that exceed the child's qualified higher education
expenses in a taxable year are generally subject to income tax and to an additional tax of 10 percent. The
Hope Scholarship Credit and Lifetime Learning Credit may not be claimed for a student's expenses in a
taxable year in which the student takes a tax-free withdrawal from an Education IRA.
Q1: What is an Education IRA?
A1: An Education IRA is a trust or custodial account that is created or organized in the United States
exclusively for the purpose of paying the qualified higher education expenses of the designated
beneficiary of the account. The account must be designated as an Education IRA when it is created in
order to be treated as an Education IRA for tax purposes.
Q2: For whom may an Education IRA be established?
A2: An Education IRA may be established for the benefit of any child under age 18. Contributions to the
Education IRA will not be accepted after the designated beneficiary reaches his/her 18th birthday.
Q3: Where may an individual open an Education IRA?
A3: An individual may open an Education IRA with any bank, or other entity that has been approved to
serve as a nonbank trustee or custodian of an individual retirement account (IRA), and the bank or entity
is offering Education IRAs. Other entities that wish to offer Education IRAs but are not approved to
serve as IRA trustees or custodians may seek approval by following the same IRS procedures used for
approval of other IRA nonbank trustees. See Notice 97-57, 1997-43 I.R.B. (October 27, 1997).
Q4: When may a taxpayer start contributing to an Education IRA for a child?
A4: A taxpayer may start making contributions on January 1, 1998, or at any time thereafter.
Q5: How much may be contributed to a child's Education IRA?
A5: Up to $500 per year in aggregate contributions may be made for the benefit of any child. The
contributions may be placed in a single Education IRA or in multiple Education IRAs.
Q6: What happens if more than $500 is contributed to an Education IRA on behalf of a child in a
calendar year?
A6: Aggregate contributions for the benefit of a particular child in excess of $500 for a calendar year are
treated as excess contributions. If the excess contributions (and any earnings attributable to them) are not
withdrawn from the child's account (or accounts) before the tax return for the year is due, the excess
contributions are subject to a 6 percent excise tax for each year the excess amount remains in the
account.
Q7: May contributions other than cash be made to a child's Education IRA?
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A7: No. Education IRAs are permitted to accept contributions made in cash only.
Q8: May contributors take a deduction for contributions made to an Education IRA?
A8: No.
Q9: Are there any restrictions on who can contribute to an Education IRA?
A9: Any individual may contribute up to $500 to a child's Education IRA if the individual's modified
adjusted gross income for the taxable year is no more than $95,000 ($150,000 for married taxpayers
filing jointly). (See Sec. 1, Q&A6 for a description of modified adjusted gross income.) The $500
maximum contribution per child is gradually reduced for individuals with modified adjusted gross
income between $95,000 and $110,000 (between $150,000 and $160,000 for married taxpayers filing
jointly). For example, an unmarried taxpayer with modified adjusted gross income of $96,500 in a
taxable year could make a maximum contribution per child of $450 for that year. Taxpayers with
modified adjusted gross income above $110,000 ($160,000 for married taxpayers filing jointly) cannot
make contributions to anyone's Education IRA.
Q10: May a child contribute to his/her own Education IRA?
A10: Yes.
Q11: Does a taxpayer have to be related to the designated beneficiary in order to contribute to the
designated beneficiary's Education IRA?
A11: No.
Q12: How many Education IRAs may a child have?
A12: There is no limit on the number of Education IRAs that may be established designating a particular
child as beneficiary. However, in any given taxable year the total aggregate contributions to all the
accounts designating a particular child as beneficiary may not exceed $500.
Q13: May a designated beneficiary take a tax-free withdrawal from an Education IRA to pay
qualified higher education expenses if the designated beneficiary is enrolled less than full-time at
an eligible educational institution?
A13: Yes. Whether the designated beneficiary is enrolled full-time, half-time, or less than half-time,
he/she may take a tax-free withdrawal to pay qualified higher education expenses.
Q14: What happens when a designated beneficiary withdraws assets from an Education IRA to
pay for college?
A14: Generally, the withdrawal is tax-free to the designated beneficiary to the extent the amount of the
withdrawal does not exceed the designated beneficiary's qualified higher education expenses.
Q15: What are "qualified higher education expenses"?
A15: "Qualified higher education expenses" mean expenses for tuition, fees, books, supplies, and
equipment required for the enrollment or attendance of the designated beneficiary at an eligible
educational institution. Qualified higher education expenses also include amounts contributed to a
qualified state tuition program. Qualified higher education expenses also include room and board
(generally the school's posted room and board charge, or $2,500 per year for students living off-campus
and not at home) if the designated beneficiary is at least a half-time student at an eligible educational
institution. The standards for determining whether a student is enrolled at least half-time are the same as
those used for the Hope Scholarship Credit. (See Sec. 1, Q&A3.)
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Q16: What is an eligible educational institution?
A16: An eligible educational institution is any college, university, vocational school, or other
postsecondary educational institution that is described in section 481 of the Higher Education Act of
1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by
the Department of Education. This category includes virtually all accredited public, nonprofit, and
proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the
Hope Scholarship Credit, the Lifetime Learning Credit, and early withdrawals from IRAs for qualified
higher education expenses.) (See Sec. 1, Q&A4, Sec. 2, Q&A3, and Sec. 4, Q&A2.)
Q17: What happens if a designated beneficiary withdraws an amount from an Education IRA but
does not have any qualified higher education expenses to pay in the taxable year he/she makes the
withdrawal?
A17: Generally, if a designated beneficiary withdraws an amount from an Education IRA and does not
have any qualified higher education expenses during the taxable year, a portion of the distribution is
taxable. The taxable portion is the portion that represents earnings that have accumulated tax-free in the
account. The taxable portion of the distribution is also subject to a 10 percent additional tax unless an
exception applies.
Q18: Is a distribution from an Education IRA taxable if the distribution is contributed to another
Education IRA?
A18: Any amount distributed from an Education IRA and rolled over to another Education IRA for the
benefit of the same designated beneficiary or certain members of the designated beneficiary's family is
not taxable. An amount is rolled over if it is paid to another Education IRA on a date within 60 days
after the date of the distribution. Members of the designated beneficiary's family include the designated
beneficiary's children and their descendants, stepchildren and their descendants, siblings and their
children, parents and grandparents, stepparents, and spouses of all the foregoing. The $500 annual
contribution limit to Education IRAs does not apply to these rollover contributions. For example, an
older brother who has $2,000 left in his Education IRA after he graduates from college can roll over the
full $2,000 balance to an Education IRA for his younger sister who is still in high school without paying
any tax on the transfer.
Q19: What happens to the assets remaining in an Education IRA after the designated beneficiary
finishes his/her postsecondary education?
A19: There are two options. The amount remaining in the account may be withdrawn for the designated
beneficiary. The designated beneficiary will be subject to both income tax and the additional 10 percent
tax on the portion of the amount withdrawn that represents earnings if the designated beneficiary does
not have any qualified higher education expenses in the same taxable year he/she makes the withdrawal.
Alternatively, if the amount in the designated beneficiary's Education IRA is withdrawn and rolled over
(as described in Q&A18 of this section) to another Education IRA for the benefit of a member of the
designated beneficiary's family, the amount rolled over will not be taxable.
Q20: Rather than rolling over money from one Education IRA to another, may the designated
beneficiary of the account be changed from one child to another without triggering a tax?
A20: Yes, provided: (1) the terms of the particular trust or custodial account permit a change in
designated beneficiaries (each trustee or custodian will control whether options like this one are
available in the accounts they offer), and (2) the new designated beneficiary is a member of the previous
designated beneficiary's family. (See Q&A18 in this section).
Q21: May a student or the student's parents claim the Hope Scholarship Credit or Lifetime
Learning Credit for the student's expenses in a taxable year in which the student receives money
from an Education IRA on a tax-free basis?
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A21: No. If a student is receiving a tax-free distribution from an Education IRA in a particular taxable
year, none of that student's expenses may be claimed as the basis for a Hope Scholarship Credit or
Lifetime Learning Credit for that year. However, the student may waive the tax-free treatment of the
Education IRA distribution and elect to pay any tax that would otherwise be owed on an Education IRA
distribution so that the student or the student's parents may claim a Hope Scholarship Credit or Lifetime
Learning Credit for expenses paid in the same year the Education IRA distributions are received.
Q22: May contributions be made to both a qualified state tuition program and an Education IRA
on behalf of the same designated beneficiary in the same taxable year?
A22: No. Any amount contributed to an Education IRA on behalf of a designated beneficiary during any
taxable year in which an amount is also contributed to a qualified state tuition program on behalf of the
same beneficiary will be treated as an excess contribution to the Education IRA. (See Q&A6 in this
section for the treatment of excess contributions.)
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Section 4: Q and A About the Taxpayer Relief Act of 1997
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Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Section 4. Using IRA Withdrawals to Pay Higher Education Expenses
Beginning January 1, 1998, a taxpayer may make withdrawals from an individual retirement account
(IRA) to pay the qualified higher education expenses for the taxpayer, the taxpayer's spouse, or the child
or grandchild of the taxpayer or taxpayer's spouse at an eligible educational institution. The taxpayer will
owe federal income tax on the amount withdrawn, but will not be subject to the 10 percent early
withdrawal tax that applies when amounts are withdrawn from an individual retirement account before
the account holder reaches age 59 1/2.
Q1: When can an individual first make a withdrawal from an IRA to pay for qualified higher
education expenses without paying the 10 percent early withdrawal tax?
A1: On or after January 1, 1998, an individual can make withdrawals from his/her IRA to pay for
qualified higher education expenses for academic periods beginning on or after January 1, 1998, without
paying the 10 percent early withdrawal tax. See Notice 97-53, 1997-40 IRB. The 10 percent early
withdrawal tax does not apply to a distribution from an IRA to the extent that the amount of the
distribution does not exceed the qualified higher education expenses for the taxpayer, the taxpayer's
spouse, and the child or grandchild of the taxpayer or the taxpayer's spouse at an eligible educational
institution. For purposes of this rule, the term "qualified higher education expenses" means tuition, fees,
books, supplies and equipment required for the enrollment or attendance of the student at an eligible
educational institution. Qualified higher education expenses also include room and board if the student is
enrolled at least half-time. Qualified higher education expenses paid with an individual's earnings, a
loan, a gift, an inheritance given to the student or the individual claiming the credit, or personal savings
(including savings from a qualified state tuition program) are included in determining the amount of the
IRA withdrawal which is not subject to the 10 percent early withdrawal tax. Qualified higher education
expenses paid with a Pell Grant or other tax-free scholarship, a tax-free distribution from an Education
IRA, or tax-free employer-provided educational assistance are excluded.
Q2: What are the requirements for an "eligible educational institution"?
A2: An "eligible educational institution" is any college, university, vocational school, or other
postsecondary educational institution that is described in section 481 of the Higher Education Act of
1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by
the Department of Education. This category includes virtually all accredited public, nonprofit, and
proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the
Hope Scholarship Credit, the Lifetime Learning Credit, and Education IRAs.) (See Sec. 1, Q&A4, Sec.
2, Q&A3, and Sec. 3, Q&A16.)
Q3: When are IRA withdrawals usually subject to the 10 percent early withdrawal tax?
A3: Generally, if a taxpayer makes a withdrawal from his/her IRA before reaching age 59 1/2, the
taxpayer must pay the 10 percent early withdrawal tax on all or part of the amount withdrawn.
Q4: In addition to the Education IRA, TRA '97 also created the Roth IRA. May a taxpayer make
a withdrawal from a Roth IRA to pay for his/her child's qualified higher education expenses?
A4: Yes. A taxpayer may make a withdrawal from a Roth IRA, as they can from other IRAs, to pay
qualified higher education expenses without paying the 10 percent early withdrawal tax.
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Section 5: Q and A About the Taxpayer Relief Act of 1997
http://www.ed.gov/inits/hope/tax_qa/sec5.html
Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Section 5. Student Loan Interest Deduction
Beginning January 1, 1998, taxpayers who have taken loans to pay the cost of attending an eligible
educational institution for themselves, their spouse, or their dependent generally may deduct interest
they pay on these student loans. The maximum deduction each taxpayer is permitted to take increases
from $1,000 in 1998 to $2,500 in 2001 and thereafter. The following table summarizes the yearly
increases.
Year
Maximum Deduction
1998
$1,000
1999
$1,500
2000
$2,000
2001 and thereafter
$2,500
The deduction is available only for interest payments made during the first 60 months in which interest
payments are required on the loan. The student loan interest deduction is available for interest payments
due and made on or after January 1, 1998. Thus, the first time taxpayers will be able to claim the
deduction is when they file their 1998 tax returns in 1999. No student loan interest deduction will be
allowed for interest due or paid before 1998.
Q1: Are there any limits on what qualifies as a student loan?
A1: Yes. The loan must have been used to pay the costs of attendance at an eligible educational
institution for a student enrolled at least half-time in a program leading to a degree, certificate, or other
recognized educational credential. An eligible educational institution is any college, university,
vocational school, or other postsecondary educational institution that is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid
programs administered by the Department of Education. This category includes virtually all accredited
public, nonprofit, and proprietary postsecondary institutions. For purposes of the student loan interest
deduction, eligible educational institutions also include institutions that conduct an internship or
residency program leading to a degree or certificate awarded by an institution of higher education, a
hospital, or a health care facility that offers postgraduate training.
Q2: Is a student loan interest deduction available if the student loan is not federally guaranteed or
otherwise subsidized?
A2: Yes. As long as the loan was used to pay the costs of attendance at an eligible educational institution
and the other eligibility requirements are met, the deduction is available for the interest on the loan. The
deduction does not depend on whether the loan is federally guaranteed or subsidized.
Q3: What costs are included in the costs of attendance?
A3: Costs of attendance include all items that are included in costs of attendance for purposes of
calculating a student's financial need in accordance with the Higher Education Act. Thus, they include
tuition, fees, room, board, books, equipment, and other necessary expenses, such as transportation. Costs
of attendance include more items than are included in qualified tuition and related expenses for purposes
the Hope Scholarship and Lifetime Learning Credits. (See Sec. 1, Q&A5 and Sec. 2, Q&A10.)
Q4: Is the deduction available for interest paid on loans used to pay for graduate school?
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A4: Yes.
Q5: Are there any limits on who may take the student loan interest deduction?
A5: Yes, there are income restrictions. To claim the maximum deduction, a taxpayer must have
modified adjusted gross income of $40,000 or less ($60,000 for married taxpayers filing jointly). The
amount of the taxpayer's deduction is gradually reduced for taxpayers with modified adjusted gross
income between $40,000 and $55,000 (between $60,000 and $75,000 for married taxpayers filing
jointly). For example, for 1998, the maximum deduction a single taxpayer with modified adjusted gross
income of $47,500 could take would be $500. Taxpayers with modified adjusted gross income above
$55,000 ($75,000 for married taxpayers filing jointly) may not claim the student loan interest deduction.
The modified adjusted gross income limitations are indexed for inflation after 2002.
Q6: May a former student whose loans are already in repayment deduct the interest they pay on a
student loan on or after January 1, 1998?
A6: Yes, but they may deduct only those payments made during the first 60 months that interest
payments are required on a loan. If interest payments on a student loan were first required before January
1, 1998, the months in which those payments were required count against the 60-month time limit for
that loan. The 60-month period may run out at different times for different loans.
Q7: May a parent claim the student loan interest deduction if the parent borrows to pay his/her
child's costs of attending college?
A7: Yes. An individual may claim the student loan interest deduction if the individual borrows money to
pay the costs of attending college for certain members of the individual's family or household (including
his/her children) and incurs the debt in a year in which the individual supplies more than half of the
student's support.
Q8: If an individual has paid more than $1,000 in interest on student loans in 1998 and is
otherwise eligible to take the maximum student loan interest deduction, how large a deduction
may the individual claim?
A8: The individual's student loan interest deduction for 1998 is $1,000, provided the individual's
modified adjusted gross income falls below the point where the deduction is reduced or eliminated.
Q9: Does an individual have to itemize his/her income tax deductions to claim the student loan
interest deduction?
A9: No. The student loan interest deduction is available regardless of whether an individual elects to
take the standard deduction or to itemize deductions. Instructions accompanying the 1998 tax forms (for
returns required to be filed in 1999) will explain how to compute and claim the deduction.
Q10: If a student is claimed as a dependent by his/her parent in a particular taxable year, may the
student take the student loan interest deduction for student loan interest that he/she pays in that
year?
A10: No. The student may not claim the student loan interest deduction in any taxable year in which
he/she is claimed as a dependent on another taxpayer's return. However, if the student continues to pay
interest on a student loan and meets the other eligibility requirements, the student may claim the student
loan interest deduction for payments made in a later year when the student is no longer a dependent on
his/her parent's Federal income tax return.
Q11: Are there any tax benefits available if the student repays his/her loan by performing
community service rather than making cash payments?
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A11: There may be. Loan forgiveness provided in return for community service is tax-free when it is
part of certain lending programs run by the Federal, state, or local government, educational institutions,
or charitable organizations. Students should consult a tax advisor to determine whether they qualify.
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Section 6]
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Section 6: Q and A About the Taxpayer Relief Act of 1997
http://www.ed.gov/inits/hope/tax_qa/sec6.htm
Notice 97-60: Questions and Answers About the Taxpayers Relief Act of 1997
Section 6. Qualified State Tuition Programs
Under current law, a qualified state tuition program (QSTP) means a program established and
maintained by a state under which a person may: (1) prepay tuition benefits on behalf of a beneficiary so
that the beneficiary is entitled to a waiver or a payment of qualified higher education expenses, or (2)
contribute to an account that is established for paying qualified higher education expenses of the
beneficiary. The tax on earnings attributable to prepayments or contributions is deferred until the
earnings are distributed from the QSTP. The beneficiary pays tax on the earnings at the time of
distribution. If amounts saved through a QSTP are used to pay for college, the student or the student's
parents still may be eligible to claim either the Hope Scholarship Credit or the Lifetime Learning Credit.
Q1: How have the prior rules for QSTPs been changed by TRA '97?
A1:
(1) QSTPs may now be used to save for room and board expenses, up to a specified level (generally the
school's posted room and board charge, or $2,500 per year for students living off-campus and not at
home);
(2) QSTPs may now be used to pay expenses not only at public and nonprofit institutions but also at
proprietary schools (i.e., any school that is an eligible educational institution for purposes of the Hope
Scholarship or Lifetime Learning Credits, see Sec. 1, Q&A);
(3) Accounts in QSTPs may now be transferred tax-free from the beneficiary to a broader range of
family members. (Step-siblings and spouses of family members have been added.)
Q2: May a student using a QSTP to pay for college also benefit from the Hope Scholarship Credit
or Lifetime Learning Credit?
A2: Yes. The student or the student's parent may claim a Hope Scholarship Credit or Lifetime Learning
Credit for qualified tuition and related expenses covered by a qualified state tuition program, provided
the other eligibility requirements for the credits are met.
Q3: When are the changes to the QSTP rules made by TRA '97 effective?
A3: Generally, the new rules go into effect on January 1, 1998. However, the new provision permitting
QSTPs to be used to save for room and board expenses is effective back to August 20, 1996.
Q4: May contributions be made to both a qualified state tuition program and an Education IRA
on behalf of the same designated beneficiary in the same taxable year?
A4: No. Any amount contributed to an Education IRA on behalf of a designated beneficiary during any
taxable year in which an amount is also contributed to a qualified state tuition program on behalf of the
same beneficiary will be treated as an excess contribution to the Education IRA. (See Sec. 3, Q&A6 for
the treatment of excess contributions to an Education IRA.)
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Section 7: Q and A About the Taxpayer Relief Act of 1997
http://www.ed.gov/inits/hope/tax_qa/sec7.hm
Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Section 7. Exclusion for Employer-Provided Educational Assistance
TRA '97 extends tax-free treatment to employer-provided educational assistance for undergraduate
courses that begin before June 1, 2000. Employers may continue to provide up to $5,250 per year in
educational assistance to each employee on a tax-free basis for courses beginning before that date,
regardless of whether the education is job-related. This benefit expires for assistance in paying for
courses that begin on or after June 1, 2000.
Q1: How does an employee learn whether tax-free educational assistance is available to him/her?
A1: Employers have this information. Employers offering tax-free educational assistance are required to
have a written plan describing the benefit and the terms under which it is available.
Q2: Does the employee have to do anything special to avoid being taxed on employer-provided
educational assistance, up to the $5,250 limit?
A2: No. The employer will automatically treat the educational assistance as a tax-free benefit and will
not include it as wages on the employee's W-2 form.
Q3: May an employee receive tax-free educational assistance from the employer to attend
graduate school?
A3: In general, no. However, employers can provide job-related educational assistance for
graduate-level education as a tax-free fringe benefit under certain circumstances. Educational assistance
would generally qualify as job-related if it maintains or improves skills required for the employee's
current job or satisfies certain express employer-imposed conditions for continued employment.
Individuals should consult a tax advisor for help in determining the tax treatment of any assistance the
individual may be receiving from an employer for graduate-level education.
Q4: If a student is enrolled in undergraduate courses in a particular year and owes $3,000 in
qualified tuition and related expenses, and the student's employer pays all of the student's
qualified tuition and related expenses, may a Hope Scholarship Credit or a Lifetime Learning
Credit be claimed for that student for that year?
A4: No. Neither the Hope Scholarship Credit nor the Lifetime Learning Credit may be claimed for that
student for that year.
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Further Information
http://www.ed.gov/inits/hope/tax_qa/further.hml
Notice 97-60: Questions and Answers About the Taxpayer Relief Act of 1997
Further Information
For further information contact: Donna J. Welch, (202) 622-4910 regarding the Hope Scholarship and
Lifetime Learning Credits; Monice L. Rosenbaum, (202) 622-6070 regarding employer-provided
educational assistance and qualified state tuition programs; Pamela R. Kinard, (202) 622-6030 regarding
Education IRAs and using IRA withdrawals to pay for higher education expenses; and John Moriarty,
(202) 622-4950 regarding student loan interest deduction (not toll-free numbers).
The IRS will publish additional guidance on the provisions discussed in this notice as well as other
provisions included in TRA '97. You may visit the IRS worldwide web site at
(http://www.irs.ustreas.gov/hot/) for information on additional guidance as it becomes available.
The Department of Education has a worldwide web site (http://www.ed.gov/prog info/SFA/
StudentGuide) you can visit and telephone numbers (1-800-4FED-AID and 1-800-USA-LEARN) you
can call to get more information on affording college and obtaining student aid, such as Pell grants and
student loans.
Drafting Information
The principal authors of this notice are Donna J. Welch, Office of Assistant Chief Counsel (Income Tax
and Accounting) and Monice L. Rosenbaum and Pamela R. Kinard, Office of Associate Chief Counsel
(Employee Benefits and Exempt Organizations). However, other personnel from the IRS and Treasury
Department participated in its development.
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Notice 98-7: Return Relating to Interest on Education Loans
http://www.ed.gov/inits/hope/interest_loans/
Part III - Administrative, Procedural, and Miscellaneous
Returns Relating to Interest on Education Loans
Notice 98-7
Purpose
Section A: Student Loan Interest Deduction
Section B: Information Reporting Relating to Student Loan Interest
Definitions
Who Must file for 1998
Information Required for 1998
Mixed Use Loans and Revolving Accounts
Coordination with Reporting on Payments of Mortgage Interest
When to File
Manner of Filing
Statements to be Provided to Payors
Collecting Information
Waiver of Penalties
Request for Comments
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OPE News and Initiatives
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Section A: The Student Loan Interest Deduction
http://www.ed.gov/inits/hope/interest_loans/sectiona.html
Notice 98-7: Returns Relating to Interest on Education Loans
Section A. The Student Loan Interest Deduction
Section 202(a) of the Act added § 221 to the Code. Section 221 allows certain taxpayers who pay
interest on qualified education loans to claim a federal income tax deduction for their interest payments,
regardless of whether they itemize other deductions.
A qualified education loan is a loan used to pay the costs of attendance at an eligible educational
institution for a student enrolled at least half-time in a program leading to a degree, certificate, or other
recognized educational credential. The student must be the taxpayer, the taxpayer's spouse, or the
taxpayer's dependent at the time the loan was taken. A loan made by an individual who is related to the
borrower, within the meaning of § 267(b) or § 707(b)(1), is not a qualified education loan.
An eligible educational institution is any college, university, vocational school, or other postsecondary
educational institution that is described in § 481 of the Higher Education Act of 1965 (20 U.S.C. 1088)
and, therefore, is eligible to participate in the student aid programs administered by the Department of
Education. This category includes virtually all accredited public, nonprofit, and proprietary
postsecondary institutions. For purposes of the student loan interest deduction, eligible educational
institutions also include institutions that conduct an internship or residency program leading to a degree
or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers
postgraduate training.
Costs of attendance are generally the same as those described in § 472 of the Higher Education Act for
purposes of calculating a student's financial need (e.g., tuition, fees, room, board, books, equipment, and
other necessary expenses, such as transportation). However, for purposes of the student loan interest
deduction, costs of attendance are reduced by educational assistance that the student receives and
excludes from gross income under § 127, § 135, § 530, or as a scholarship. The student loan interest
deduction is available only for interest payments made during the first 60 months, whether or not
consecutive, in which interest payments are required on the loan. Notice 97-60, 1997-46 I.R.B. 8,
provides additional information about the student loan interest deduction.
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Student Guide--Federal Pell Grants
http://www.ed.gov/prog_info/SFA/StudentGuide/1998-9/pel.hml
1998
THE STUDENT GUIDE
1999
FINANCIAL AID
FROM THE U.S. DEPARTMENT or EDUCATION
General
Federal Pell Direct and Compus-Based Responsibilities Important
Information
Grants
FFEL Loans
Programs
and Rights
Terms
Federal Pell Grants
What is a Federal Pell Grant?
A Federal Pell Grant, unlike a loan, does not have to be repaid.
Pell Grants are awarded only to undergraduate students who
have not earned a bachelor's or professional degree. (A
professional degree would include a degree in a field such as
pharmacy or dentistry.) For many students, Pell Grants provide
a foundation of financial aid to which other aid may be added.
How do I qualify?
To determine if you're eligible financially, the U.S. Department of Education uses a
standard formula, established by Congress, to evaluate the information you report
when you apply. (See "Financial Need".) The formula produces an Expected Family
Contribution (EFC) number. Your Student Aid Report (SAR) contains this number
and will tell you if you're eligible.
How much money can I get?
Awards for the 1998-99 award year (July 1, 1998 to June 30, 1999) will depend on
program funding. The maximum award for the 1997-98 award year was $2,700.
You can receive only one Pell Grant in an award year. How much you get will
depend not only on your EFC but on your cost of attendance, whether you're a
full-time or part-time student, and whether you attend school for a full academic
year or less. You may not receive Pell Grant funds from more than one school at a
time.
How will I be paid?
Your school can either credit the Pell Grant funds to your school account, pay you
directly (usually by check), or combine these methods. The school must tell you in
writing how and when you'll be paid and how much your award will be. Schools
must pay you at least once per term (semester, trimester, or quarter). Schools
that do not use formally defined, traditional terms must pay you at least twice per
academic year.
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Can I receive a Federal Pell Grant if I am enrolled less
than half time?
Yes, if you're otherwise eligible. You won't receive as much as if you were enrolled
full time, but your school must disburse your Pell Grant funds in accordance with
your enrollment status and cannot refuse you an award simply because you're
enrolled less than half time.
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HOPE Scholarship and Other Tax Benefits: Making the 13th and 14th years of
education-at least two years of college-as universal in America as high school is today.
The President's plan includes five tax benefits for middle-class students and families that accept
the responsibility to pursue additional education for their children and themselves. We believe
that not only will these students and families reap substantial personal and financial benefits
from these education incentives, but these investments will also pay a huge long-term dividend to
the country. For much of the 20th century, tax policies included incentives to invest in capital
and equipment. At the beginning of the 21st century-the education and information age-we
must create incentives to invest long term in education and human capacity.
HOPE Scholarships. A centerpiece of President Clinton's HOPE and Opportunity Agenda for
higher education is the proposed HOPE Scholarship tax credit, which offers two years of
tuition at the typical community college for any student enrolled at least half-time. It provides
students with a maximum $1,500 tax credit for tuition and required fees in their first year, and
another $1,500 in their second year if they work hard, stay off drugs, and earn at least a B minus
average in their first year. This $1,500 tax credit will pay the full cost of tuition at a typical
community college-essentially making community college free or nearly so for every student.
In 1998, this credit is expected to help 4.2 million middle-income students pay for college.
Although the HOPE Scholarship tax credit is priced to pay the full cost of two years of tuition at
a typical community college, the credit can be applied to tuition at any college, including four-
year public and private colleges. The credit would be a substantial down payment for parents
sending their children to four-year colleges with higher tuition. Students receiving tax credits
would still be eligible for other federal student aid, including student loans, Pell Grants, and
Work Study. However, the maximum tax credit would be $1,500 minus any federal grants
awarded to the student.
The proposal builds on the enormously successful HOPE Scholarship program in Georgia,
which guarantees any student in the state of Georgia free college as long as they have earned a B
average and stay off drugs. This year the scholarships are helping 80,000 students-including 70
percent of the freshman class at the University of Georgia.
The HOPE scholarship tax credit will help open the doors of college opportunity to every
American who works hard and makes the grade, regardless of that student's ability to pay, since
education at the typical community college will now essentially be free. The program also makes
it clear that with opportunity comes the responsibility to work hard and achieve at a high level.
This benefit will initially be available without restrictions tied to previous academic performance
but the continued benefit will be reserved for those people who, by definition, are willing to work
for it. It's America's most basic bargain: we as a nation will help create opportunity if you'll take
responsibility.
$10,000 Tax Deduction for Education and Training. We have also proposed a tax deduction
33
An important aspect of the new Direct Loan program is that it provides students the ability to
repay their loans as a percentage of their income - income-contingent repayment - to
encourage community service, and to make debt more manageable and to reduce defaults. As of
November 1996, nearly 100,000 borrowers with loans totaling $1.5 billion have consolidated
into direct lending. About three-quarters of these borrowers are selecting non-standard repayment
options with 52 percent selecting income-contingent repayment.
Through the legislation that created the Direct Student Loan program we were able in 1993 to
reduce by 50 percent (from 8 percent to 4 percent) the student loan fees that lenders and
guarantee agencies were allowed to levy on student borrowers. But we need to do more. We
propose to further reduce these fees in both the new Direct Student Loan and the older Federal
Family Education Loan programs, cutting loan fees from 4 percent to just 2 percent on need-
based Stafford loans, and to 3 percent on other loans for students and parents. Furthermore,
because the Congressional Budget Office and other analysts have noted that lender costs are very
low during the in-school period, when students are not required to make payments on their loans,
we propose to reduce the interest rate paid to lenders during that period by one percentage point.
Increasing Grant Aid Available to Students - Pell Grants
The Administration has worked hard to increase funding for student financial aid programs. Aid
available to students increased by $12 billion between 1993 and 1997-an increase of 48 percent.
This year, aid available to students will increase by an additional $3.4 billion for a record total of
$36 billion (excluding consolidation loans) benefiting an estimated 8.1 million students in 1998.
Pell Grants are the most important form of student financial aid for the nation's neediest
students. In the decade preceding 1992, funding for this critical program did not keep pace with
inflatio, which seriously eroded the Pell Grants' purchasing power. The Clinton Administration
began immediately in 1993 to restore fiscal integrity to this program at a time when it had been
allowed to accumulate a projected internal program deficit of over $2 billion. After eliminating
that program deficit, the President secured bipartisan support for the largest Pell Grant increase in
recent history, a $230 increase (9 percent) in the maximum grant to $2,700 by FY97. This
represents a full $400 increase, more than 17 percent, in the maximum grant since 1993.
We now are proposing to increase the maximum award from $2,700 to $3,000, as well as greatly
expand eligibility to older independent students. Increasing the maximum award to $3,000
provides more aid to currently eligible students, and makes an additional 130,000 students
eligible for the grants. The President's budget also expands the eligibility of low income
students age 24 and older. This change will make an additional 218,000 students eligible for Pell
Grants, and expand aid for over 890,000 students by an average of $800. These changes,
contained in the President's balanced budget, will increase Pell Grant funding by $1.7 billion in
fiscal year 1998, a more than 25 percent increase over current funding levels.
32
Helping More Students Prepare for College through "GEAR UP"
http://www.ed.gov/gearup/gu1019.html
Helping More Students Prepare for College
through "GEAR UP"
"I also ask this Congress to support our efforts to enlist colleges and universities to reach
out to disadvantaged children starting in the sixth grade so that they can get the guidance
and hope they need so they can know that they, too, will be able to go on to college."
--President Clinton, State of the Union address, January 27, 1998
GEAR UP is a new national initiative to encourage more young people to have high expectations,
stay in school, study hard and take the right courses to go to college.
High-achieving students from low-income families are five times as likely not to attend college
than high-achieving students from high-income families [NELS 1998].
In a recent survey, almost 70% of parents indicate that they have little information or want more
information about which courses their child should take to prepare for college, and 89% of parents
want more information about how to pay for college, including the use of tax credits [Gallup, Sept.
1998].
GEAR UP (Gaining Early Awareness and Readiness for Undergraduate Programs). GEAR UP is
modeled in part after President Clinton's High Hopes for College proposal to create a national goal that
every college should partner with at least one middle school in a low-income community to help raise
expectations and ensure that students are well-prepared for college. GEAR UP also builds on an existing
State early college awareness program. This new competitive grant program administered by the U.S.
Department of Education supports early college preparation and awareness activities at both the local
and the State level. The President's FY2000 budget request doubles the funding for GEAR UP from
$120 million in FY99 to $240 million in FY2000, and it would enable GEAR UP to reach almost
400,000 students in the year 2000.
GEAR UP Partnership grants. As outlined in the President's High Hopes for College proposal, this
initiative will award multi-year grants to locally-designed partnerships between colleges and low-income
middle schools, plus at least two other partners -- such as community organizations, businesses, religious
groups, State education agencies, parent groups, or non-profits -- to increase college-going rates among
low-income youth. To be most effective, partnerships will be based on the following proven strategies:
Informing students and parents about college options and financial aid, including providing
students with a 21st Century Scholar Certificate -- an early notification of their eligibility for
financial aid;
Promoting rigorous academic coursework based on college entrance requirements;
Working with a whole grade-level of students in order to raise expectations for all students; and
Starting with 6th or 7th grade students and continuing through high school graduation with
comprehensive services including mentoring, tutoring, counseling, and other activities such as
after-school programs, summer academic and enrichment programs, and college visits.
GEAR UP State Grants. These grants will build on the experience of the former State grant program
replaced by the GEAR UP program in the new HEA law. GEAR UP State grants will be awarded to
States to provide early college awareness activities, improved academic support, information on paying
for college, and scholarships. The proposed programs must treat low-income students as a priority and
should be coordinated with the efforts of schools, local community organizations, and colleges and
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Helping More Students Prepare for College through "GEAR UP"
http://www.ed.gov/gearup/gu1019.html
universities.
Applications Due April 30, 1999. The final GEAR UP application is on the web at
http://www.ed.gov/gearup/apply.html and through 1-800-USA-LEARN. The fastest way to get an
application is by downloading or printing it from the web.
Technical Assistance Workshops in March. Regional workshops to assist prospective GEAR UP
applicants in developing their projects and applications will be offered in March 1-15, thanks to the
sponsorship of the Ford Foundation. Visit the web site or call Johnson Niba for more information at
202-708-8596. Broadcast from Columbus, Ohio, on March 30th at 2 p.m. to 3 p.m., the GEAR UP
Satellite Teleconference will enable people from across the country to engage in an interactive program
designed to provide helpful and practical information about GEAR UP. Participants are strongly
encouraged to register before March 19th.
Questions or comments about GEAR UP? Email [email protected], call 1-800-USA-LEARN, or check
http://www.ed.gov/gearup on the Web.
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ESEA
NEA/AFT
Studies
Fast Facts
http://nces.ed.gov/fasttacts/display.asp?id=18
National Center for O.E Education, Statistics
NCES Fast Facts
Higher education enrollment levels
Question:
What are the higher education enrollment levels?
Response:
Between 1985 and 1995, higher education enrollment increased by 16 percent, from
12.2 million to 14.3 million. Much of this growth was in part-time and female
enrollment. During the years of 1985 through 1995, the number of men enrolled in
institutions of higher education rose by 9 percent and the number of women enrolled
increased by 23 percent.
Since 1979, the number of women in higher education has exceeded the number
of men. In 1995, 6.3 million men and 7.9 million women were enrolled in
institutions of higher education, compared to 5.0 million men and 3.5 million
women in 1970.
Between 1985 and 1995, the number of male full-time graduate students
increased by 23 percent, compared to a 64 percent increase for full-time women.
Among part-time graduate students, the number of men increased by 6 percent
while the number of women rose by 26 percent.
The enrollment levels for minorities have been increasing slowly over time. For
example, in 1980, nine percent of blacks, four percent of Hispanics, two percent
of Asians or Pacific Islanders and less than one percent of American
Indian/Alaskan Natives were enrolled in institutions of higher education. In 1995,
eleven percent of blacks, eight percent of Hispanics, six percent of Asians or
Pacific Islanders, and one percent of American Indians/Alaskan Natives attended
college.
Related Tables and Figures:
Enrollment Rates of 18- to 24-year-olds in Institutions of Higher Education,
by Race/Ethnicity: 1967 to 1996
The Condition of Education 1998, Indicator 10: Enrollment Patterns of
First-Time Beginning Postsecondary Students
Total Fall Enrollment in Institutions of Higher Education, by Attendance
Status, Sex of Student and Control of Institution: 1947 to 1995
Total Fall Enrollment in Institutions of Higher Education, by Level of Study,
Sex, and Race/Ethnicity of Student: 1976 to 1995
Total Fall Enrollment in Institutions of Higher Education, by Level of
Enrollment, Sex, Attendance Status, Type and Control of Institution: 1994
and 1995
Total Graduate Fall Enrollment in Institutions of Higher Education, by
Attendance Status, Sex of Student, and Control of Institution: 1969 to 1995
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Fast Facts
http://nces.ed.gov/fasttacts/display.asp?id=31
National Center for & Education, Statistics
NCES Fast Facts
28002
Financial aid for postsecondary students
Question:
Do you have any statistics on financial aid for postsecondary undergraduates?
Response:
In 1995-96, nearly 50 percent of undergraduates received financial aid, most commonly
in the form of grants and loans and least commonly in the form of work-study. Female
students were more likely to receive financial assistance than their male counterparts.
Among students enrolled full-time for the full year, 68 percent received financial aid.
Percent of Undergraduates Receiving Aid in 1995-96
Enrollment of
Total
Characteristics
Undergraduates¹ (in
Federal
Non-Federal
Aid 2
thousands)
All
16,677
49.7
36.6
32.0
undergraduates
By Sex
Men
7,197
46.7
33.1
31.4
Women
9,481
51.9
39.2
32.5
By Race
White,
11,681
47.1
33.2
31.1
non-Hispanic
Black,
2,030
62.9
50.0
38.3
non-Hispanic
Hispanic
1,723
54.2
44.6
30.6
Asian American/
Pacific Islander
967
42.9
33.1
30.8
American Indian/
163
59.4
47.8
37.1
Alaskan Native
By Attendance Status
Full-time,
6,306
68.4
55.6
45.7
full-year
Part-time and
10,157
44.1
29.4
28.1
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Fast Facts
http://nces.ed.gov/fasttacts/display.asp?id=31
Part-time and
10,157
44.1
29.4
28.1
other part-year
1 Numbers of undergraduates may not equal figures reported in other tables, since
these data are based on a sample survey. Includes all postsecondary institutions.
2 Includes students who reported they were awarded aid, but did not specify the source
or type of aid.
Source: National Center for Education Statistics, U.S. Department of Education, Digest
of Education Statistics, 1997, Table 315, page 330.
For the complete version of the table, please click here.
Percent of Undergraduates Receiving Aid in 1989-90
Enrollment of
Total
Characteristics
Undergraduates¹
Federal
Non-Federal
Aid 2
(in thousands)
All
12,600
44.0
30.0
32.3
undergraduates
By Sex
Men
5,530
42.2
27.4
31.4
Women
6,936
44.6
31.2
32.7
By Race
White,
9,410
41.2
26.3
31.2
non-Hispanic
Black,
1,142
61.2
50.0
40.5
non-Hispanic
Hispanic
840
44.2
34.4
31.6
Asian American
575
35.5
25.5
28.2
American Indian
83
51.6
31.8
44.1
By Attendance Status
Full-time, full-year
7,418
56.4
41.9
40.9
Part-time and
4,683
25.9
12.5
19.7
other part-year
1 Numbers of undergraduates may not equal figures reported in other tables, since
these data are based on a sample survey.
2 Includes students who reported they were awarded aid, but did not specify the source
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Fast Facts
http://nces.ed.gov/fastfacts/display.asp?id-31
or type of aid.
Source: National Center for Education Statistics, U.S. Department of Education, Digest of
Education Statistics, 1993, Table 308, page 311.
Related Tables and Figures:
Percent of Undergraduates Receiving Aid, by Type and Source of Aid
Received, and by Control and Level of Institution: 1992-93 and 1995-96
Postbaccalaureate Students Enrolled Full-Time and Part-Time, by Aid
Status, Source of Aid, and by Level of Study and Control and Level of
Institution: 1992-93 and 1995-96
The Condition of Education 1997, Indicator 12: College Costs and Family
Income
Other Resources:
National Postsecondary Student Aid Study: Student Financial Aid Estimates
for 1995-96
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Fas Facts
http://nces.ed.gov/fasttacts/display.asp?id-25
National Center for P.E. Education, Statistics
NCES Fast Facts
U.S expenditures on higher education
Question:
How much does the United States spend on higher education?
Response:
In 1994-95, the total public and private institution current fund expenditures per student were
$17,681. Overall spending per full-time equivalent student increased at all higher education
institutions from the mid-1980s until 1994-95. Private institutions invested more money per
student than public institutions, especially at private, four-year institutions.
Total Public and Private Institutions Current Fund Expenditures Per Full-Time Equivalent
Student in Institutions of Higher Education, in 1994-95 Constant Dollars
School Year
Total Current
All Institutions
4-Year
2-Year
Fund
Institutions
Institutions
Expenditures
1970-71
-
$13,861
$16,344
$5,837
1980-81
64,052,938
14,238
17,767
6,058
1985-86
97,535,742
15,773
19,659
6,538
1990-91
146,087,936
16,608
20,945
6,584
1994-95
1
182,968,610
17,681
22,542
6,876
1 Preliminary data.
Public Institutions Current Fund Expenditures Per Full-Time Equivalent Student in
Institutions of Higher Education, in 1994-95 Constant Dollars
4-Year
School Year
All Institutions
2-Year Institutions
Institutions
1970-71
$12,096
$14,858
$5,644
1980-81
12,478
16,348
6,000
1985-86
13,707
17,802
6,558
1990-91
13,960
18,370
6,540
1994-95 1
14,833
19,980
6,778
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Fas Facts
http://nces.ed.gov/fasttacts/display.asp?id-25
1 Preliminary data.
Private Institutions Expenditures Per Full-Time Student in Institutions of Higher Education,
Current Fund Expenditures in 1994-95 Constant Dollars
4-Year
School Year
All Institutions
2-Year Institutions
Institutions
1970-71
$18,758
$19,417
$8,505
1980-81
19,609
20,712
6,889
1985-86
21,826
23,492
6,323
1990-91
24,860
26,424
7,210
1994-95 1
26,331
27,639
8,573
1 Preliminary data.
Source: National Center for Education Statistics, U.S. Department of Education, Digest of
Education Statistics, 1997, Table 336, page 354.
Related Tables and Figures:
Current Fund Expenditures of Institutions of Higher Education, 1980-81 to 1994-95
Current Fund Expenditures of Public Institutions of Higher Education, 1980-81 to
1994-95
Current Fund Expenditures of Private Institutions of Higher Education, 1980-81 to
1994-95
The Condition of Education 1998, Indicator 56: International Comparisons of
Expenditures for Education
Other Resources:
Current Funds Revenues and Expenditures of Institutions of Higher Education:
Fiscal Years 1987 through 1995
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General News Articles
9/9/98 - News: Study: Inequalities Higher Education - Education Week
http://www.edweek.com/ew/vol-18/01deseg.h18
August 1, 1998
EDUCATION WEEK on the WEB
EDUCATION WEEK
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Study: Inequalities Persist
In Access to Higher Education
By Julie Blair
Washington
Across the Nation
Go to
A recent report highlighting stagnant
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graduation rates for black college students
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has brought renewed attention to the need
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for greater cooperation between K-12
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schools and higher education.
The report by the Southern Education Foundation cites inadequate K-12
schooling as one of several factors limiting African-Americans' access to
Read our story,
"Minority College
and success in college. For example, low-income students--who are
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disproportionately likely to be black--are far less likely than middle-
Percent in 1994,"
income students to enroll in rigorous classes during high school or take
June 19, 1996.
Advanced Placement exams than those in families with higher incomes,
the study released here last month concludes.
"Four-year universities need to engage
For More Information
themselves in a systematic way with
elementary and secondary programs,"
Copies of "Miles To Go" are
available for $20 each from the
said C. Peter Magrath, the president of
SEF at 135 Auburn Ave. N.E.,
the National Association of State
2nd Floor, Atlanta, GA
Universities and Land-Grant Colleges.
30303-2503; or by calling (404)
523-0001
Universities and public schools "must
set up programs that get young boys
and girls into science and math and let them know they have an
opportunity to go to college," said Mr. Magrath, a member of the
advisory board that oversaw the report.
The study by the Atlanta-based foundation also warns of shortcomings in
financial-aid allocations and the need for greater mentoring and other
forms of help for minority college students.
Money Problems
"Miles to Go: A Report on Black Students in Postsecondary Education"
examined public higher education in 16 Southern states and in
Pennsylvania, Ohio, and Missouri--all states that once segregated their
colleges. Nearly three-fourths of all black freshmen in the United States
attend school in the states studied.
The percentage of African-Americans aged 18-24 who received
bachelor's degrees from public colleges and universities has barely
increased over 20 years, the report says.
Black students earned 10.3 percent of all bachelor's degrees given in
1995, up only slightly from 8.5 percent in 1976. African-Americans make
up 13 percent of the U.S. population, according to the U.S. Census
Bureau.
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9/9/98 - News: Study: Inequalities Higher Education - Education Week
http://www.edweek.com/ew/vol-18/01deseg.h18
In several states, the proportion of blacks who are first-time, full-time
freshmen lags substantially behind the percent of African-Americans in
the 18- to 24-year-old population overall.
South Carolina has the largest disparity; Georgia, Alabama, Missouri,
Delaware and Louisiana showed substantial disparities, the study states.
In Texas, Oklahoma, Kentucky, and West Virginia, the percentage of
black freshman exceeded the population of black college-age students.
The states, however, have the lowest population of African-American
students. Maryland was the only state noted for "reasonable progress."
All too often, the report says, the problem for African-American students
is money.
"Many financial-aid programs do not reach students who need them
most," said Norman C. Francis, a member of the advisory committee and
the president of Xavier University of Louisiana in New Orleans, the
nation's only predominantly black Roman Catholic college or university.
Money "is a major barrier to black students."
According to the report, more than one-third of financial aid in Southern
states is given without consideration of need--bad news for black families
in the region, who earn almost 50 percent less than the average
middle-income white family. Moreover, the current trend in aid is toward
student loans rather than outright grants.
But the issue is more complicated, said Theodore M. Shaw, an associate
director and counsel for the NAACP Legal Defense and Educational
Fund Inc. in New York City.
The report's findings illustrate "a national trend in which many people
have just given up or turned a blind eye to the issues of race," Mr. Shaw
said. "If this report is accurate, then it has implications for not only
African-Americans but for the entire region. No one is going to be well
served by a population which lags behind the rest of the population."
Lack of Mentors
Tighter admissions policies and the loss of remedial programs also hinder
minority students, the report says. Often, those who are admitted remain
at risk of failure because of a lack of mentors and other forms of
assistance.
Among the report's other findings:
About one-third of blacks who enroll in four-year schools in the states
studied do not earn degrees within six years. In Mississippi, for example,
40 percent of incoming freshmen in 1988 were African-American. By
graduation, that percentage had dropped to 23 percent.
Only five of the 19 states have a faculty that is more than 10 percent
black.
Black students in 13 states overwhelmingly attend community colleges or
historically black colleges and universities. Only 8.6 percent of first-year
black students enrolled in predominantly white, prestigious public
colleges and universities in those states.
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9/9/98 - News: Study: Inequalities Higher Education - Education Week
http://www.edweek.com/ew/vol-18/01deseg.h18.
After graduation, only a handful of African-Americans pursue advanced
degrees. In 1976-77, blacks made up 3.8 percent of those who earned
doctoral degrees. In 1994-95, that figure had risen only to 4.3 percent.
Responsibility, the report concludes, lies with just about everyone. States
must improve their K-12 education systems. Colleges and universities
must recommit to integrating their campuses and provide monetary and
emotional support for black students. And business leaders, nonprofit
organizations, and citizens' groups must also help out.
"There is much, much more that needs to be done to close the gap," said
Elridge W. McMillan, the president of the SEF. "There are dire
implications."
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C 1998 Editorial Projects in Education
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