The Fiscal Cliff and Higher Education Funding

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Late Tuesday, January 2, the Senate and the House agreed upon a fiscal cliff compromise to extend the Bush-era tax breaks for another two months. Though this delay is a relief to many taxpayers, it is still wildly unclear on how higher education will be affected in the near future. If at the end of the delay, a deal is not agreed upon, many institutions and those that attend could endure significantly negative consequences.

For example, the compromise protected the American Opportunity Tax Credit. This credit allows families who earn $80,000 or less ($160,000 or less if filing jointly) to reduce their tax liability by up to $2,500 with a potential to also receive a portion of expenses over this amount in a refund. According to journalist Tyler Kingkade of The Huffington Post, this credit could subsequently “trim the overall cost of a college degree by $10,000.”[1] If this credit expires in the new deal, college families will feel it financially.

Likewise, if Congress does not agree to continue to support federal programs, such as the Supplemental Educational Opportunity Grant (SEOG) or Federal Work Study (FWS), in March these programs may see a cut of 8.2 percent. According to the Department of Education’s fiscal records for 2010-2011, 718,000 students received FWS earnings that assisted them with educational expenses.[2] 1,633,000 students received SEOG funds in 2010-2011.[3] Combined, these programs assisted students with $2.2 billion dollars.

Much of the focus in the media regarding the fiscal cliff has been on whether or not the fiscal cliff compromise would long term resolve the overall federal deficit. Many politicians have called for spending cuts citing that it negatively affects the overall economy. However, it is important to also remember what these cuts are referring to. Educational funding does not just support students seeking an education or institutions in keeping their doors open, but it also guarantees a continuous flow of educated professionals entering the workforce. Cutting the budget can have a ripple affect that no one is quite prepared for.

By Brittany Barker, HEAG consultant,

[1] Kingkade, Tyler. “Fiscal Cliff Deal Spares Higher Education Research Funding, Tuition Tax Credit.”Huffington Post. (2012): n. page. Web. 4 Jan. 2013. <>.

[2] United States . US Department of education. Federal Work Study Income Category Listing. 2012. Web. <>.

[3] United States . US Department of education. Federal Supplemental Educational Opportunity Grant Income Category Listing State Listing. 2012. Web. <>.