House passes tax credit for college expenses

The House on Thursday passed a bill to provide a tax credit for higher education expenses.

Approved by a vote of 227-187, the measure, H.R. 3393, would consolidate four existing tax breaks for tuition-related expenses into one credit.

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The new American Opportunity Tax Credit would be available for the first four years of a student's higher education. It would provide a 100 percent credit for the first $2,000 of qualifying expenses and a 25 percent credit for subsequent expenses of $2,000. The maximum tax credit would be $2,500.

Qualifying expenses would include tuition, fees and materials needed for coursework. 

However, the measure would exclude Pell Grants from income qualifications. It would also require Pell Grant recipients to use money from the grant first toward college expenses before turning to the tax credit.

Democrats objected to only making the credit available for four years, arguing it would be unfair to nontraditional students who take more than four years to complete their degrees.

"Undergraduates who take longer than four years to graduate would be impacted," said Rep. Sandy Levin (Mich.), the top Democrat on the House Ways and Means Committee.

Rep. Charles Rangel (D-N.Y.) further objected to creating a long-term tax credit without any offsets.

"It's permanent, there's no provisions to pay for it, and it buries us in more debt," Rangel said.

But House Ways and Means Committee Chairman Dave Camp (R-Mich.) said setting no expiration date for the credit would provide students and their families with certainty.

What we're looking for is not only making this policy simpler and easier to understand ... but we also want to make this permanent," Camp said. "Let's make it permanent so families and students can rely on a constant policy."

The Obama administration said it opposed the measure but stopped short of a veto threat. It said it supports making the tax credit last indefinitely but opposes the $800 billion price tag without an offset.