Federal and State Tax Benefits Can Help Lower College Costs

ALBANY, NY (02/02/2009)(readMedia)-- The turn of a new year means tax season is fast approaching. The New York State Higher Education Services Corp. (HESC) reminds students, recent graduates, and families about several federal and state tax credits and deductions which may help reduce college or student loan interest expenses. HESC is the state agency that helps people pay for college.

"Credits and deductions for higher education expenses are sometimes overlooked by taxpayers," said James C. Ross, HESC president.

"The New York State and federal governments provide these benefits to help reduce overall college tuition costs or student loan interest," he said.

Federal tax benefits include the Hope Scholarship Tax Credit to help offset education tuition and related education expenses for the first two years of college. It is not a scholarship, but a credit deducted from the amount of tax owed. The maximum amount of Hope credit that can be claimed in 2008 is $1,800.

The Lifetime Learning Tax Credit, provided by the Internal Revenue Service, is also credited to the amount of taxes owed to help offset higher education expenses after the first two years.

Taxpayers may use only one of these tax credits for each eligible student per tax year. However, more than one benefit may be claimed in the same year when using a different eligible student's expenses. For example, you may use the Hope credit for your college freshman and the Lifetime Learning credit for your college junior.

The IRS also provides a Student Loan Interest Deduction to help reduce the amount of taxable income. To be eligible, you must have been enrolled at least half-time in a post-secondary degree or certificate program. A maximum of $2,500 student loan interest paid each year may be deducted; the allowable deduction decreases as income increases.

Eligibility requirements and other qualifications for these federal tax benefits can be found on the HESC Web site at www.hesc.org in the "Paying for College" section.

New York also provides a college tuition tax credit and itemized deduction, which can be claimed even if you claim a federal credit or deduction for qualified college tuition expenses.

You may qualify for the state college tuition credit or itemized deduction if you are a full-year New York State resident who paid qualified undergraduate tuition expenses in 2008 - graduate tuition and attendance do not qualify. Details, including qualifications and frequently asked questions about the New York State benefit are available on the HESC Web site.

About HESC: HESC is the nation's largest in-state student loan guaranty agency providing more grant and scholarship money to college students than any other state in the nation.

The state agency helped nearly 650,000 students achieve their dream of attending college by providing $4.5 billion in grants, scholarships and loan guarantees in 2007-08, including $795 million awarded through the Tuition Assistance Program (TAP) to more than 370,000 students.

HESC administers New York's 529 College Savings Program, a nationally-acclaimed program which boasts over $8 billion in assets in more than 600,000 accounts.

HESC also provides training and technical services to financial aid administrators, high school counselors, and lenders.

-30-