With all the talk about spending and stimulus legislation and bailouts, it can be easy to lose track of what benefits taxpayers can actually expect to receive. Most likely, everyone knows that the American Recovery and Reinvestment Act, perhaps better known as “the stimulus,” will create jobs through funding “shovel-ready” projects and will put a little extra in paychecks through a tax rebate that will take effect this summer. You probably also know that there’s also financial aid in there for education, but you may not be sure exactly what.
Frankly, so much federal legislation and talk of change has been floating around in the last two years that anyone who last paid a tuition bill as recently as 2007 probably doesn’t even recognize financial aid in 2009. To help, we’ve prepared a breakdown of where student financial aid stands currently.
Pell Grants
The American Recovery and Reinvestment Act increased the maximum Federal Pell Grant award from $4,731 for 2008-2009 to $5,350 for 2009-2010. The maximum Pell award will go up again in 2010-2011 to $5,500 under this legislation.
The income threshold to qualify for federal grant programs also increased. Now students with an expected family contribution (a number determined by completing the FAFSA) of up to $4,671 (up from $4,041 this year) can qualify for Pell grants. They will not receive the whole award, but even the minimum award has increased—from $400 for full-time students in 2007-2008 to $976 for the same group in 2009-2010, due in part to the College Cost Reduction and Access Act, which increased all Pell awards by $490.
Students qualifying for Federal Pell Grants can also pick up additional college funding through Academic Competitiveness Grants or SMART grants, which include Pell eligibility in their criteria. Many non-federal college scholarships and grants also use Pell eligibility to determine awards, so the newly Pell-eligible will definitely want to do a scholarship search to see what’s out there.
Work-Study
More students will also see “federal work-study” on their financial aid award letter in 2009-2010 thanks to the economic stimulus legislation. More money is available to work-study programs that allow students to get a part-time job on (or occasionally off) campus and count the income as financial aid. Work-study programs provide great job opportunities for student workers, and since the money is given in the form of a paycheck, students can use these funds to pay their tuition bills or to cover living expenses.
Tax Benefits
One of the biggest perks of the American Recovery and Reinvestment Act is the creation of the American Opportunity Tax Credit, which replaces the Hope Credit. The tax benefits under Hope only went up to $1,800 and only could be taken for two years. The American Opportunity Tax Credit can be used for four years, can fund up to $2,500 of college costs (100% of the first $2,000 plus 25% of the next $2,000, for a total of $2,500), and up to 40% is refundable, so people who don’t pay as much in taxes as they would qualify to receive in the credit can still get something.
Additionally, the income level at which the American Opportunity Tax Credit phases out is higher than the Hope credit, allowing individuals with incomes of up to $90,000 and married couples with incomes of up to $180,000 to take it.
Families will be able to start taking advantage of the American Opportunity Tax Credit on their 2009 taxes.
Other Benefits
Much more is included in the American Recovery and Reinvestment Act. For example, students with 529 savings plans can now use that money to purchase a computer for school. Additionally, states will receive billions of dollars over the next two years, with a portion of the money devoted specifically to funding projects at public institutions of higher education, as well preventing or reversing massive reductions in state education spending.
While student loans stayed the same in the stimulus, they did receive a boost in the fall through the continuation of the Ensuring Continued Access to Student Loans Act, as well as other recent legislation, including some new aid to lenders.
If you’d like to read more about how recent legislation has affected paying for college, our blog archives feature breakdowns of the 2007 College Cost Reduction Act, the 2008 Higher Education Opportunity Act, the 2008 Ensuring Continued Access to Student Loans Act, the 2008 GI Bill, and more examples of what’s going on with college in Congress.
I would like to know why the student and parent loans are at such a high interest rate. Years ago they wanted you to consolidate, increasing the original rate of the plus loans, and / or student loans. Putting my third child through college is a financial burden. We are already paying a hefty monthly amount to a lender for the first two children, and they have taken out their maximum student loans as well, in addition to getting masters and financing that as well. Something has to be done to reduce the interest rates charged
I wonder when all this help we the students are getting, I wonder when the colleges are going to realize that we are going to have more help to raise the tuition again. They are very greedy like that. They think, more help form the government more money for them to have.
This all sounds nice but will it really help? I am a part time student attending a community college. I live on my own, with no help finacially from my family. I file my own taxes, and my parents do not claim me. I am 20 years old and I am still concidered to be “dependent”. They use my parents PLUS my income and say that there is no way to change it. That until I am 24 or get married they have to use my parents income even though I have tons of proof that I support myself fully. I can not get ANY help. No grants at all, just loans I have to pay back. Will this stuff really help me?
Every improvement helps. At a time when my school’s budget has a projected cut of 20% (one of the leading universities in the nation), I’m just thankful that there IS an increase in aid available because of the certain rise in the cost of education. Unfortunately not everyone will feel it, but it really helps people out like me. I’m paying every penny of my outrageous tuition and housing bills. I already qualify for financial aid only because my single mother hardly makes squat as a real estate agent, so I sympathize with you, LeAnna. I just got lucky enough to have a broke parent, as bittersweet as that is.
LeAnna, I’d check on that. I don’t think that they are allowed to do that. I’m 19 and have been independent since last year. My mom is a stickler for everything tax wise, and she just told me that she and my dad weren’t allowed to claim me because they were providing none of my financial aid. I’m not sure if that is just for me, but it seems like that should be the same for everyone. They can only claim you (I think, but could be wrong) through the Hope claim. I could very well be wrong though. Hope that helps. :/
And I am so grateful to these government additions. regardless of whether tuition will leave them behind, they are going to be a lifesaver right now, which is when most people need it. Especially in this economy, these will be so helpful. I’ve been on both sides of the financial aid wall, and now that I’m on the less fortunate side, I’m with Marissa.
Its has been my dream to study abroad,but the opportunity is not there for me because parent dont havet the financial help for me. So i need help.
I am with LeAnn….my 20 yr old works full time, goes to school full time, supports herself, and doesn’t get any financial aid due to them saying she’s a dependent! It’s NOT fair!!
The ironic part of this is that while the Federal money may increase, colleges, especially private schools like mine, have become very adept at finding out the exact amounts that each student will be able to receive…and promptly raising tuition slightly higher than that amount.
The simple fact is that education costs in this country have taken on the form of a “bubble”, and while it may be profitable for the banks and universities to continue this game, it will eventually burst like the other bubbles that have come to symbolize what was the American economy.
Education opportunity in America is headed toward drastic restriction unless the entire system is completely reformed…and no “throw some money at it” approach by the federal government can change this.