A new college tuition tax credit is expected to help 9.4 million American families this year, U.S. Treasury Secretary Timothy F. Geithner said on Thursday. This credit is known as the American Opportunity tax credit, a relief program designed to ease the cost of college tuition and fees.
Tax Credit to Offset Rising Tuition Costs
It’s no secret that college tuition costs have been steadily increasing over the past decade.
According to a College Board study released in Oct. 2010, the average cost of college tuition for public four-year institutions in 2010 alone had increased 7.9 percent over the previous year, requiring in-state students to pay an average of $7,605 for tuition, while non-profit colleges and universities increased 4.5 percent, charging an average of $27,293 for the year.
Because tuition has been steadily increasing for years, students have had to turn to student loans and other financial aid for assistance, while some students have had to avoid college altogether.
Geithner expressed hope that the relief program would make a difference for families looking for an affordable college option, while convincing more students to attend college.
Families to Receive $18.2 Billion in Relief
The tax credit, which is partially refundable, is expected to provide $18.2 billion in relief to families struggling to pay rising tuition bills or mounting student debt.
Remaining in place through 2012, families will have access to up to $2,500 a year. However, the the Treasury Department says the average participating family is expected to receive a credit of about $1,900.
The good news is, according to Treasury analysis, the maximum available AOTC credit is expected to cover about 80 percent of tuition and fees at the average two-year public institution. For those attending four-year public institutions, the credit is expected to cover about one-third tuition and fees.
The department hopes that this level of relief will not only work to pay parents and students pay some for contributing tuition to schools, but will also convince more students to pursue higher education.