College Tidbits Blog

You don’t have tell me how expensive college is, I’ve got a college tuition that I have been paying for the past three years.

If you’re like me you are always on the look-out for a way to reduce the cost and get back some of your money during the tax season.

Here are a few tax breaks that you can take advantage of during this year that will help put some of your money back into your pockets:

1. American Opportunity Tax Credit

$2,500 in tax credits on the first $4,000 of qualifying educational expenses. Under the American Recovery and Reinvestment Act (ARRA), more parents and students are eligible to qualify over the next two years for a tax credit.

This tax credit first became available during the 2009 tax year. It was designed to modify the existing Hope tax Credit for tax years 2009 and 2010. This modification, allows a broader range of taxpayers, including many with higher incomes and those who owe no tax to qualify.

It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

• The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.

• The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

Note: This tax credit is schedule to be available from 2009 thru 2012, but Congress could extend it.

For more information check out these sites:

• http://www.hrblock.com/taxes/tax_tips/deductions_credits/hope_credit.html?ttiptitle=American%20Oppertunity%20and%20Hope%20Credit
• http://taxes.about.com/od/deductionscredits/qt/American-Opportunity-Tax-Credit.htm

• http://www.irs.gov/newsroom/article/0,,id=211309,00.html

2. The Lifetime Learning Credit

The Lifetime Learning Credit, is also available to taxpayers who have incurred education expenses. For this credit to be claimed by a taxpayer, the student must attend school on at least a part-time basis. Individuals eligible for this credit are the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent.

This credit allows for a 20% tax credit for first $10,000 of qualified tuition and expenses to be fully creditable against the taxpayer’s total tax liability. The maximum amount of the credit is $2000 per eligible student. The credit is available for net tuition and fees (less grant aid) paid for post-secondary enrollment.

Details regarding the Lifetime Learning Credit are below:

• It is worth up to $2,000
• The credit is available on a per-taxpayer (family) basis, and is phased out at the same income levels as the Hope Scholarship Credit available for single filers with income below $48,000 (partial credit for those between $48,000 and $58,000) and joint filers with incomes below $96,000 (partial credit for those between $96,000 and $116,000)
• Allows for 20% of the first $10,000 in qualified tuition and related expenses.
• Individuals eligible for this credit are the taxpayer, the taxpayer’s spouse, or the taxpayer’s dependent if not claimed as a dependent.
• It may be used for college tuition at any level (part-time, also)

For more information check out these sites:

• http://www.hrblock.com/taxes/tax_tips/deductions_credits/lifetime_learning_credit.html

• http://www.irs.gov/individuals/article/0,,id=96273,00.html

3. The College Tuition and Fees Deduction

If you choose, you can claim an education tax deduction instead of a college tuition tax credit.

• You are allowed to deduct up to $4,000 off your income
• Eligible individuals include single filers with income below $80,000 and joint filers with incomes below $160,000, this meant for the parents of a dependent student or for the student if not claimed as a dependent.
• The only eligible expenses are room and board type expenses, this deduction may not be used for any expenses other than tuition and fees (like room and board).

Note: This deduction is usually a college tax deduction is used when your income is too high for a higher education tax credit. A school tax credit reduces the amount of taxes you pay and an education tax deduction reduces your income.

For more information check out these sites:

• http://www.hrblock.com/free-tax-tips-calculators/deductions-credits/education-tax-breaks.html
• http://www.hrblock.com/taxes/tax_calculators/rate_tables/education_credits.html

4. Deduct Student Loan Interest

Thanks to more relaxed rules regarding the deduction of student loan interest, many folks who weren’t previously able to take advantage of this tax break can now do so.

If you qualify, you can write off up to $2,500 of annual college loan interest charges. The catch, however, is that this break is phased out if your modified AGI is too high.

Specifically, the 2011 phaseout range for unmarried taxpayers is between modified AGI of $60,000 and $75,000. For joint filers, the range is between modified AGI of $120,000 and $150,000.

Read more: The College Tax Breaks Explained - Personal Finance – College Planning

The Huffington Post has been doing a series of posts about the growing number of college students who are saddled with college loan debt.

Titled “Majoring in Debt” the Huffington Post, has been encouraging college students to share their stories. The post also seeks to uncover abuses in the student debt industry.

Excerpts:

It used to be that many college students finished school with little or no debt. But according to an ongoing project by the Huffington Post Investigative Fund, recent college graduates carry an average debt burden of $23,200.

And as college becomes less and less affordable, that figure continues to rise. The number of student loan accounts in the U.S., said Equifax, which compiles credit data, has peaked at 69 million — a 29 percent increase from two years ago. In total, students have borrowed $527 billion to go to school…[Read all of Majoring in Debt]

Reading these stories was quite an eye opener and it has lead me to ask the following:

What the HELL Were We Thinking?

• Have we in the spirit of education opened the flood-gates and allowed the banks to have free-run at our children? Have we allowed the banks, to stick our children with debt they may never recover from?
• Were we way too naive to think that the very group of people, who may very well be responsible for the near-collapse of this nation’s economy, would act responsible and do right by our children?

Banks the New “Den-of-Thieves”

By nature our children, our youth are quick to judge, quick to make rash decisionsand are unstable in much they do.  Even the most mature 18-22 olds are prone to making mistake and poor decisions.

Enter the banks bearing lots of cash with easy guidelines and lots of contracts with fine print, then add in young students (and some old ones) eager to sign on the dotted line and more than willing to mortgage their future for the dream of being able to attend the school of their choice, graduate and make lots of money.

Then all of a sudden faced with the reality of graduating into an economy that has few jobs or even worse not finishing school, but still left with on the hook for thousands of dollars in student loans, it all comes crashing down.

Some Radical Solutions to the Problem:

• Students should not have to pay back a student loan if they graduate. Funds will flow back into the economy through them working and paying taxes.
• Make it mandatory that all students young and old, be required to receive counseling prior to signing for a student loan and that the terms of the loan be reviewed by a trained financial professional.
• Reduce the amount of the loan through public service such as teaching or other services.
• Inflict SEVERE punishment (including criminal penalty) on any bank, or other lender caught engaging in misconduct.
• Cap the amount of college tuitionthat colleges or universities can charge. We want bright minds but are we willing to sacrifice something for them. In the current only the Rich will be able to afford a college education.

Just my 2 cents, I was off on a tangent today… What are your thoughts about what can and should be done?

What I paid to to attend college in comparison to today, is literally night and day. The cost of college today is astronomical. Is it out of control? 

In a recent interview with salon.com, author Anya Kamenetz says that college has become way too expensive. As a result, she is all for students seeking much cheaper options such as online classes, even classes on YouTube (YouTube?).

In an article with salon.com title “DIY U”: The end of university prestige, Anya discusses her book “Generation Debt”, argues that a decentralized college experience — in which the least effective parts of college life are replaced by technology, social media and self-directed learning — can limit dropout rates and reverse the devastating cost spiral.  The interview is a must read…[DIY U]