Congressman’s proposal helps current students with tuition costs, while providing relief with high levels of student loan debt interest
Washington, D.C. – Rep. Bruce Braley (IA-01) today continued to roll out his College Affordability Plan by introducing legislation designed to help students and parents manage rising tuition costs, as well as provide relief to those facing significant student loan interest payments.
“The value of the American Opportunity Tax Credit and student loan interest deduction have declined significantly—while at the same time tuition and student debt levels are higher than ever—that’s not right,” Braley said. “These incentives need to have their value restored and indexed to inflation so that we’re not facing the same situation in another five or ten years.”
Braley is introducing the College Tuition and Debt Relief Act of 2014 today, which is designed to renew and extend tax incentives that help current and future college students afford rising tuition costs, while providing those with high student loan interest costs tax relief. Braley’s legislation would:
1) Strengthen American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) provides college students relief from the high cost of tuition. The AOTC is a $2,500 tax credit that can be taken to offset the cost of tuition, fees, and course materials for undergraduate students at two and four year colleges and universities. However, the AOTC is set to expire at the end of 2017. Braley’s legislation would:
· Make the AOTC permanent and increase the credit from $2,500 to $3,000
· Index AOTC to inflation to ensure that the credit increases as tuition rises
2) Double Student Loan Interest Deduction
This important deduction allows student loan borrowers to deduct up to $2,500 on interest paid on their student loans. The $2,500 limit, originally established in 2001, has not kept pace with inflation or rising tuition costs, significantly reducing its real value. Iowa students graduate with the 6th highest average student debt of any state. According to the Project on Student Debt, the average debt of an Iowa college graduate is $29,456 and Iowa ranks 3rd nationally in the percentage of students who graduate with debt, with nearly 71% taking on student loan debt. Braley’s legislation would:
· Double the deduction from $2,500 to $5,000
· Index the deduction to inflation ensuring that it will increase as tuition rises
Earlier this week, Braley unveiled the outline of his College Affordability Plan which contains four central components to help students, graduates and parents deal with rising tuition costs and growing student loan debt. The plan includes tax incentives, a grant program for current college students facing financial hardship, and a bill allowing students to refinance their loans at lower market rates.
Yesterday, after asking for and receiving hundreds of stories about Iowans’ experiences attaining and paying back student loans, Braley shared those comments with Secretary of Education Arne Duncan.
For decades college tuition costs have been rising significantly. Student loan debt today totals $1.2 trillion, $864 billion of which is backed by the federal government. More than 70 percent of students who graduated from college in 2012 had student loan debt.
A copy of Braley’s College Tuition and Debt Relief Act of 2014 is available online HERE.
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