Extending the American Opportunity Tax Credit Was A Mistake

The primary goal in creating the Hope tax credit was not about increasing enrollment, so suggesting that now and then measuring success against a different goal seems like a faulty exercise. The Hope Tax Credit was targeted primarily on middle class tax relief to help middle class families deal with increasing college sticker costs in the early 1990’s that was disproportionally squeezing them. It also was enacted in the wake of the 1994 elections where the President was seeking ways to reach out to the new Republican majority in supporting investments in education. One legislative compromise outcome of the Hope Tax Credit was that it also helped boost appropriations in Pell funding at that time as well -bringing tax relief to some middle income families and more grant aid to lower income families than otherwise would have happened in that difficult budget environment. The AOTC was born out of several bipartisan legislative proposals by Democrats and Republicans over several Congresses in an effort to enhance Hope to better serve lower income students and more of the middle class through four years of college. Your assertion that the main difference was higher income and the refundable portion ignores the major differences. AOTC is available now for the first four years instead of just the first two years of college which is what Hope covered. Congress also expanded expense eligibility to include course materials for the first time, which expands the eligible expenses students on financial aid can claim if that aid is not meeting all of their academic costs, which helps reduce their out of pocket and loan costs. Four years versus two years is by far the most significant reform particularly considering for many students aid may be reduced in the later years of college and replaced with loans. You can quibble about income thresholds and refundability and certainly those issues can be revisited in tax reform, but make no mistake lower income and middle income families overwhelmingly value the AOTC and supported President Obama and Congress in extending the program. In fact in a national post election poll 82% of voters supported extending AOTC with similar support across all income levels.

Thank you Andrew, very insightful as I was not aware of the comparison and outcome of the Hope and Lifetime Learning Credits. All the best.