UC students miss chance to claim credits

By Marcelle Richards
Daily Bruin Contributor

Last year, 70 percent of potentially eligible University of
California students missed the opportunity to claim Hope
Scholarship and Lifetime Learning tax credits.

Preliminary findings from the UC Tax Credit Utilization Survey,
which had a 41 percent response rate from 9,000 UC students, showed
students did not claim tax credits due to lack of knowledge or
doubt about their eligibility.

Both tax credits were introduced during the Clinton
administration as part of the Taxpayer’s Relief Act of 1997
to aid students with annual gross adjusted incomes between
$40,000-$50,000 who often find themselves in a financial
catch-22.

Many students eligible for the tax credits earn too much to
receive need-based financial aid, and thus have difficulty paying
for a four-year college education.

“I would expect that the value of these credits will
increase as more students and families are made aware of their
availability,” said Barbara Hoblitzell, principal policy
analyst for the University of California, Office of the President.
“However, that is not to say there are not challenges yet to
be overcome.”

The most commonly cited reasons for not claiming a tax credit
include an income in excess of the eligible maximums and not being
aware of the tax credits or how to claim them, Hoblitzell said.

Many students assumed their financial status disqualified them
from receiving aid, which deterred 55 percent of undergraduates and
65 percent of graduate students from applying, she added.

But survey results indicated that the 30 percent of students who
did apply for the tax credits claimed nearly $80 million.

The Hope Scholarship and Lifetime Learning tax credits may be
claimed by any student enrolled in a post-secondary school who is
working toward a degree, certificate or other educational
credential, according to the Internal revenue Service.

The Hope Scholarship tax credit must be claimed within the first
two years of post-secondary education during which the student must
be enrolled in school at least half-time. The maximum tax credit
amount is currently $1,500 and will be indexed for inflation in
2002.

The Lifetime Learning tax credit differs in that no limitations
exist as to the number of years students may claim these
credits.

The credits may be claimed for qualified tuition and related
expenses by filing a 1098-T form.

To assist applicants, supplemental instructions on how to
calculate eligibility and claim Hope Scholarship and Lifetime
Learning tax credits are included with tax forms after filing
taxes.

“The biggest cause (of confusion) is that students
don’t file their own taxes and they don’t know about
tax law changes,” said Nick Valdivia, assistant director of
UCLA’s Financial Aid office.

The financial aid office works to refer students to tax
consultants who then determine eligibility and predict monetary
results.

“Personally, I think tax credits are a good thing for all
families,” Valdivia said. “But it has some
administrative burdens.”

Additional paperwork and changes in the law force financial aid
staff to adjust to the new rules attached to the tax credits.

“It’s a tax situation that’s rolling over into
financial aid,” Valdivia said.

Overall, the tax credits have been viewed cynically by financial
aid administrators, according to Hoblitzell.

“Among the financial aid community, when the federal
government uses money to offset costs, it should be
need-based,” she said. “They don’t feel
it’s as targeted as it should be.”

Financial aid administrators believe that money is not being
directed toward low-income students, where it’s needed most,
Hoblitzell said.

In the early 1980s, Congress reduced the amount distributed
through Pell grants as costs of tuition continued to rise. Although
the amount distributed by Pell grants was slightly restored in the
1990s, the aid only covers about one-third of total college costs,
leaving low income students in financially pressing situations,
according to the United States Student Association, a
Washington-based student lobby group.

Because low-income students often need to work to raise money,
time in school is often sacrificed for work.

The tax credits are thought to provide aid to middle- and
upper-class students who often never encounter the same level of
financial difficulty that is experienced by those of lower income.
The College Board has followed suit, offering 40 percent of its aid
on a non-need basis, making it more difficult for those who
genuinely need financial aid to get it.

Hope Scholarship and Lifetime Learning tax credits were first
made available in 1998 and are still subject to modifications in
these new stages to allow for broader eligibility, Hoblitzell
said.

In the meantime, UC officials are advocating continued use of
the tax credits to increase overall use and awareness about the
benefits.

For more information, visit www.1098-t.com or call
1-877-HOPE-811.

UC STUDENTS CLAIMING TAX CREDITS  Hope and
Lifetime Learning tax credits, designed to aid students with gross
adjusted incomes between $40,000-$50,000, fail to pool applicants
due to various causes, including a lack of knowledge about the
credits or assumed ineligibility. SOURCE: Tax Credit Utilization
Survey, UC Office of the President Original graphic by ADAM
BROWN/Daily Bruin Web adaptation by YUAN HUANG