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House and Senate Recovery Packages Would Improve Higher-Education Tax Credits

REVISED
February 2, 2009

The economic recovery package passed by the House last week[1] contains a measure that both would extend the Hope tax credit to nearly 4 million low-income students and make the credit more valuable to millions of middle-income students.  The Senate Finance Committee has included a similar proposal in its economic recovery package. 

The House measure would increase the credit’s maximum size from $1,800 to $2,500, allow it to be claimed for a maximum of four years instead of the current maximum of two years, enable students from families with that do not earn enough to owe income tax to qualify for a credit of up to $1,000, and somewhat broaden the education-related expenses that the credit can offset.  The Senate proposal is similar, except that low-income students could qualify for a credit of up to $750, rather than $1,000.  These changes would help make college affordable, or more affordable, for millions of low- and moderate-income students. 

Helping low- and moderate-income students afford college is particularly important during a recession.  When the labor market is weak and many individuals are unable to find work, one of the best long-term investments the nation can make is in upgrading the skills of its workforce.  The more people who go to college during the downturn and improve their skills, the better positioned the nation will be when the economy rebounds.

Click here to read the full-text PDF of this report (10pp.)

End Notes:

[1] H.R. 1., American Recovery and Reinvestment Act of 2009.

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