KNOXVILLE, Tenn.– For a majority of University of Tennessee students and their families, the college tax credits approved this week by Congress will have the value of a scholarship worth $500 to $1,500 annually.
UT President Joe Johnson said Friday an estimated 29,600 of 42,000 UT students may qualify for the credits based on family income reported to the university.
“The door to a college education opened wider with the tax credits and other higher education incentives approved by Congress and supported by President Clinton,” Johnson said. “We are grateful and appreciative.”
The credits go into effect this fall for students and families who are U.S. citizens.
Johnson said he disagreed with critics of the tax relief package who claimed the incentives would prompt colleges and universities to raise tuition.
“That would be a mistake,” Johnson said. “There is only one justification for raising fees — need. This kind of legislation should never be used to justify fee increases.”
Estimates of students who may qualify for the credits are 5,870 at UT-Chattanooga, 16,750 at UT-Knoxville, 5,300 at UT-Martin, and 1,600 at UT-Memphis, Johnson said.
The credits represent about 60 percent of the fees paid by in-state freshmen or sophmores at UT campuses, except Memphis where the credits equal 20 percent of fees for students in nursing, dentistry, pharmacy and medicine, Johnson said.
Walter Lambert, UT vice president for state and federal relations, said details of the tax package may not be clear for a few more days.
“For now the tax credit for families of freshmen and sophomores equals 100 percent of the first $1,000 of tuition expenses per year and 50 percent of the next $1,000,” Lambert said.
The credit begins to phase out at annual income levels of $40,000 for an individual and $80,000 for couples.
A life-long learning credit for the third and fourth year of college and graduate school equals 20 percent of the first $5,000 through the year 2002, Lambert said, adding that phase out is the same as for the first and second year credit.
Other higher education incentives approved by Congress included the following:
— Authorization to open IRA-type savings accounts for college with interest untaxed.
— Okay of penalty-free withdrawals for education from IRAs.
— Approval of tax deductions for interest paid on student loans, increasing up to $2,500 annually in the third year. The provision phases out at income levels between $40,000 and $50,000 for single tax return filers and $60,000 and $75,000 for joint filers.
— Approval of a tax exemption for earnings on prepaid college tuition plans, such as the Baccalaureate Education System Trust program enacted by the Tennessee legislature.
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Contact: Dr. Joe Johnson (423-974-2241) Walter Lambert (423-974-2206)