Compromise Stimulus Bill Expands College Grants but Not Student Loans

Compromise Stimulus Bill Expands CollegeGrants but Not Student Loans

After weeks of back-and-forth political jockeying overPresident Obama’s proposed economic stimulus package, Congress settled on a compromisebill that offers expanded federal grants and tax benefits to college students, alongwith funding for states to restore education budget cuts and for researchinstitutions to expand their development.

Overall, the final stimulus bill will deliver between $50billion and $75 billion to higher education, estimates Inside Higher Ed.

No Stimulus Help forStudent Loans

In previous years, non-federal private studentloans have offered undergraduate and graduate students a source for additionalfinancial aid that they could use to supplement their federal student loans andgrants. But in the face of the current credit freeze, most lenders of privatestudent loans have suspended their private-loan programs or simply gone out ofbusiness altogether.

Those few lenders that still offer private student loanshave tightened their credit criteria to the point that many students andfamilies can no longer qualify — especially as borrowers’ credit scores continueto take hits from foreclosures, missed bill payments, and cancelled creditcards.

In the current economic environment, with unemploymentclimbing, home equity largely gone, the value of investments and collegesavings plans evaporated, and privatestudent loans hard to come by, more and more families are finding themselves unable to meettuition and other college costs on federal student aid alone.

To help the growing number of cash-strapped students whowill need additional financial aid on top of federal grants and student loans,the House of Representatives, in its version of the stimulus bill, had proposedto increase borrowing limits by $2,000 on unsubsidized federal college loans,which are available to eligible undergraduate and graduate students regardlessof their financial situation.

The Senate version of the stimulus legislation, on the otherhand, would have injected $61 million into the federal Perkins student loanprogram, providing additional funding for those subsidized federal collegeloans targeted at the neediest students,.

But the compromise bill does neither. The stimulus funds forhigher education will go toward expanded grants, work-study, and tax benefits,with no money earmarked for federal student loans.

The Higher Education Stimulus for Students

• American OpportunityTax Credit: Proposed byPresident Obama on the campaign trail, this tax benefit program willtemporarily replace the current Hope Scholarship Tax Credit, raising thecurrently available maximum education tax credit from $1,800 to $2,500. The newtax credit will be available for up to four years of college and will be up to40 percent refundable for those families who don’t owe any taxes.

• Federal Pell Grants: The federal grant program for low-incomestudents will receive an additional $17.1 billion in funding.

• Federal Work-Study Program: This federal financial aid program, whichallows eligible students to earn money working part-time in government-subsidizedjobs, will receive $200 million in funding.

The Higher Education Stimulus for States

States will receive $53.6 billion in education stimulus aidover the next two years, $39.5 billion of which will be used to restorespending cuts made to education and public colleges as a result of state budgetdeficits, and $8.8 billion of which will be handed to state governors to beused for high-priority “critical” initiatives, which can include educationprograms and school facilities improvements and maintenance. 

The Higher Education Stimulus for ResearchInstitutions

• National Science Foundation: A federal agency dedicated to research andtraining in all fields of non-medical science and engineering, the NSF willreceive a total of $3 billion, with $2.5 million allocated for research, $400million for infrastructure, and $100 million for education.

• National Institutes of Health: Part of the U.S. Department of Health andHuman Services and the primary federal agency for conducting and supportingmedical research, the NIH will receive $10 billion — $8.5 billion for researchand $1.5 billion for university research facilities.

• Department of Energy: The DOE, which oversees U.S. energy and nuclear security, will receive $2 billion for research, with$1.6 billion going to the Office of Science and $400 million going to theAdvanced Research Projects Agency for Energy (ARPA-E).