How New “Fiscal Cliff” Laws Impact Higher Education
After months of failed negotiations, the United States Congress saved the nation from the so-called “fiscal cliff” late Tuesday evening as the House of Representatives passed the American Taxpayer Relief Act of 2012 with a final vote of 257 to 167, averting automatic tax increases and indiscriminate spending cuts.
One noted benefit of the legislation’s passing is the extension of the American Opportunity Tax Credit through 2017. Launched as part of the stimulus bill in 2009, the American Opportunity Tax Credit helps families pay for college by providing a maximum $2,500 credit annually to help cover the costs of books, supplies, tuition and fees for individuals who possess an adjusted gross income of $80,000 or couples possessing an adjusted gross income of $160,000.
In addition to the five-year extension of the American Opportunity Tax Credit, the American Taxpayer Relief Act of 2012 gave a one-year extension to the Tuition and Fees Deduction, which lets taxpayers claim a maximum of $4,000 in college tuition expenses.
Mark Kantrowitz, founder of Finaid.org, told The New York Times that another feature of the legislation is the elimination of the previous five-year limit on Student Loan Interest Deduction, enabling families to claim student loan interest on their tax forms even after five years.
The measure granted extensions outside of the realm of higher education, most notably with the extension of the Qualified Zone Academy Bond program. Qualified Zone Academy Bonds are 10- to 20-year loans that help schools in low-income communities pay for construction, renovation, and technology. The legislation also pushed back the expiration date on several deductions by a year, including the $250 deduction teachers receive for purchasing classroom supplies.
As part of the fiscal cliff deal, the looming spending cuts known as sequestration have been given a two-month delay. Much of the talk surrounding sequestration has focused on the potential $500 billion cut in the Department of Defense’s budget.
But sequestration also poses a veritable threat to education funding in the very near future.
According to the Chronicle of Higher Education, the across-the-board cuts would lead to an 8.2 percent loss of federal funding for discretionary programs and a 7.6 percent loss of federal funding for mandatory programs. The cuts would severely impact university research opportunities and scholarship programs, including financial aid for veterans and funding for the National Institutes of Health and the National Science Foundation.
Also put at risk by potential sequestration is Head Start, the pre-school program for low-income children. According to Education Week, the Department of Health and Human Services-administered program would be cut immediately if sequestration were to take place. As for sequestration’s effect on K-12 education, the same Education Week article notes that the impact would be felt in the 2013-2014 year due to the nature of funding for education programs.
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