College Loan Corporation Alerts Students and Parents: This Tax Season, Be Sure to Maximize Education-Related Savings.

Business Editors/Education Writers

SAN DIEGO--(BUSINESS WIRE)--Feb. 4, 2004

Education tax credits and deductions can save families

thousands of dollars

With tax returns for 2003 due in April, students, graduates and parents should be aware of the full range of education-related deductions and credits that can reduce their tax bills and help offset the cost of college. Individuals and families who pay expenses for higher education are often eligible for multiple tax benefits, offering considerable savings.

"Students, graduates and their families can potentially cut thousands of dollars off their tax bills this year," said Mark Brenner, Senior Vice President for College Loan Corporation. "If you have any expenses related to higher education, chances are that you can claim at least one benefit. From lifetime learning credits to deductions for work-related education, a host of education tax benefits can help you reduce your tax burden. It's very important to check your eligibility before filing your 2003 return. With tuition costs at all time highs, tax savings can help make paying for college easier. Tax rules are often complex, so we urge families to consult our quick checklist for help navigating the rules."

College Loan Corporation's Tax Checklist helps families get a better understanding of the potential savings they are eligible for. Assistance is also available from the IRS by calling their help line at 1-800-829-1040 or by referring to Publication 970, "Tax Benefits for Higher Education," available for download from the IRS website at http://www.irs.gov.

College Loan Corporation's Tax Checklist (note 1)

1) Deduction for Student Loan Interest

-- Up to $2,500 in student loan interest payments can be deducted 

from taxable income.

-- Loans must have been used to pay for qualifying educational

expenses: tuition, fees, room, board, books, supplies,

transportation, and other college-related costs.

-- Eligibility for the interest deduction varies with income; the

amount is gradually phased out between $50,000 and $65,000 in

modified adjusted gross income for single taxpayers and

between $100,000 and $130,000 for married taxpayers filing

jointly.

-- The deduction is not available for married taxpayers filing

separately.

2) Lifetime Learning Credit

-- A non-refundable tax credit of up to $2,000 per return can be

claimed if you paid qualified education expenses for yourself,

your spouse, or a dependent for whom you claim an exemption on

your tax return. Unlike deductions, tax credits are subtracted

from the amount of tax owed, rather than your taxable income.

-- This credit applies to tuition and certain related expenses

for courses that are part of a postsecondary degree program or

taken to acquire or improve job skills. Students do not need

to be pursuing a degree or other recognized education

credential.

-- Eligibility for the tax credit varies with income; the amount

is gradually phased out between $41,000 and $51,000 in

modified adjusted gross income for single taxpayers and

between $83,000 and $103,000 for married taxpayers filing

jointly.

3) Education Savings Bond Program

-- Individuals can cash in qualifying educational savings bonds

and exclude some or all of the interest earned on the bonds

from their income if they meet certain conditions.

4) Hope Scholarship Tax Credit

-- A non-refundable tax credit of up to $1,500 for each eligible

student in the household is available to cover tuition and

fees required for the first two years of an undergraduate

degree program or other recognized education credential.

-- Student must be enrolled at least half time for at least one

academic period beginning during the year.

-- Eligibility for the credit varies with income. The amount is

gradually phased out between $41,000 and $51,000 in modified

adjusted gross income for single taxpayers and between $83,000

and $103,000 for married taxpayers filing jointly.

5) Tax-Free Withdrawals from Traditional or ROTH IRAs 

-- Taxpayers can avoid paying the additional 10 percent tax on

early withdrawals if the money is spent on qualified higher

education expenses.

-- You can avoid the tax if the money is spent on education for

yourself, your spouse, your child or grandchild, or your

spouse's child or grandchild.

6) Tuition and Fees Deduction

-- For filing your 2003 returns, up to $3,000 can be deducted

from taxable income for tuition and fees required for

attendance at an eligible college, university or vocational

school. Looking ahead to next year's filing, the maximum

deduction will increase to $4,000.

-- Eligibility for the credit varies with income. The deduction

is not available for single taxpayers whose modified adjusted

gross income is more than $65,000, married taxpayers filing

jointly whose modified adjusted gross income is more than

$130,000, and married taxpayers filing separately.

-- Deduction cannot be taken if the taxpayer or someone else

claims the Hope Scholarship Tax Credit or a Lifetime Learning

Credit for the same student in the same year.

7) Employer-Provided Educational Assistance

-- Up to $5,250 in educational assistance received from employers

may be excludable from wages and other compensation reported

on Form W-2.

8) Deductions for Work-Related Education

-- Workers taking college courses directly related to their

current job may be able to deduct many of the costs of

education as a business expense, including tuitions, books,

supplies, lab fees, and certain transportation or other fees.

-- Education must be to maintain or improve skills in your

present job or must be required by an employer or by law.

-- To claim this deduction, employees must itemize deductions on

Schedule A; self-employed workers must file a Schedule C or F

with their tax return.

9) Coverdell ESA 

-- A savings account that grows tax-free can be set up to pay the

qualified educational expenses of a pre-designated student who

must be under 18 or have special needs at the time the account

is established.

-- Any individual, including the student, can contribute to the

account if their income is under $110,000, or $220,000 for a

joint return. The maximum annual cash contribution is $2,000

per student, no matter how many contributors to the account.

-- Generally, withdrawals from these accounts are tax-free if

they do not exceed the student's qualified education expenses

for the year.

10) Qualified Tuition Programs (QTP)

-- QTPs established by states and educational institutions allow

individuals to prepay or contribute to an account for paying a

student's qualified educational expenses.

-- No tax is due on distributions from a state-sponsored QTP

unless the amount distributed is greater than the student's

adjusted qualified education expenses. Beginning in 2004,

distributions from a QTP established by an eligible education

institution (private college or university) will also be

excludable from income if the amount distributed is used to

pay qualified education expenses.

-- Contact your state government or the educational institution

in which you are interested to find out whether they

participate in a QTP.

About College Loan Corporation

College Loan Corporation, based in San Diego, is a national full-service student loan lender that has originated over $8 billion in student loans for over a quarter of a million students and their families. The company makes higher education more accessible through innovative loan products and industry-leading customer service. College Loan Corporation offers the nation's best student loan advice line, open 24 hours a day, 7 days a week at 1-800-2-COLLEGE. For more information on College Loan Corporation, visit http://www.collegeloan.com.

Note 1: The checklist offers a guidepost of areas of potential savings. An individual should consult the IRS or a tax professional for advice specific to their circumstances. This release should not be relied on as legal or tax advice.