President’s FY 2015 Budget Recommends Tax Breaks For Students
On Monday, White House officials outlined in broad terms several of the President's tax priorities from his proposed fiscal year 2015 federal budget. Among the key provisions, his FY 2015 budget asks Congress to make permanent the American Opportunity Tax Credit, currently set to expire in December 2017. The administration says the credit will provide an average benefit of $1,110 to 11.5 million families. The benefit provides up to $2,500 in partially refundable tax credits for tuition.
President Obama is also proposing a simplification of taxes for nearly all Pell Grant recipients, whereby Congress would clarify tax credit rules and simplify calculations for the credit so that Pell recipients see a reduction in their taxes or an increased tax credit. House Republicans last week unveiled their own bill calling for a permanent American Opportunity Tax Credit but also proposed consolidating numerous higher education tax breaks. Additionally, the House proposal recommends increasing taxation of some student loan borrowers.
Targeted Tax Relief for Federal Student Loan Forgiveness Programs
The President's budget will also seek to exempt from taxation the student loan forgiveness the federal government provides to borrowers after they have made payments for 20-25 years through income-driven repayment programs. The federal government forgives the debt of borrowers working in the public or nonprofit sectors after as few as 10 years, and this Public Service Loan Forgiveness is already exempt from taxation (but some in Congress want to change that). However, forgiveness on outstanding debt after 20 or 25 years of repayment is not tied to employment and is taxable as income under current law.
I welcome this initiative, um, but there is a lot not to like about other proposals in this budget:
Read more about proposals that would reduce benefits for high-debt borrowers.
To learn more about the President's proposed FY 2015 budget, click here.
To read an article by Michael Stratford for Inside Higher Ed, click here.
