Increased Pell Grants Available
For college students waiting for news about increased Pell Grants, Friday the 13th 2009 turned out to be a good day. The final version of the federal economic stimulus bill kept a number of its original financial aid provisions, including increased Pell Grants, additional work-study jobs, and a larger, more accessible tax credit for higher education expenses.
Recognizing the value of an educated workforce
It took a lot of hard bargaining, but the new legislation provides billions of dollars for higher education students and their families over the next two academic years. In addition to a Pell Grant boost of up to $5,350 in 2009, it also allots funding for job training/retraining, distributes money to states for offsetting education budget cuts, and supplies financial assistance to families affected by job layoffs and other recession hardships.
How college students benefit from the 2009 economic stimulus plan
|Education Benefit||What's New|
|Increased Pell Grants||
The maximum Pell Grant award increased to $5,350 for the 2009-2010 school year (starting July 1, 2009) and to $5,550 for 2010-2011 school year (starting July 1, 2010).
The money set aside for the increased Pell Grants will allow an additional 800,000 students to get Pell funding. Altogether, there should be approximately 7 million Pell Grants available this year.
|Increased Work-Study||The federal Work-Study program is getting a $200 million boost, enough to pay for an estimated 130,000 new work-study jobs, each providing an average of $1,500 a year in earnings.
In early proposals, all federal work-study funding was tied to a community service requirement, but this provision was dropped from the final legislation. For now, there are no changes to the way the U.S. Education Department will allot work-study money to eligible colleges.
|College Savings Plan: New Eligible Expenses||Purchasing a computer for schoolwork is now a qualified expense for the tax-exempt 529 College Savings Plan.|
Need training in order to transfer to a new job or industry? There's $4 billion for career training and dislocated worker job training, including almost $3 billion for new Workforce Investment Act initiatives that will help colleges offer career training programs, particularly in high-demand industries. Selected community college courses may qualify for WIA coverage.
Additional funding will safeguard Trade Adjustment Assistance benefits for at least 160,000 new workers who get laid off over the next two years due to offshored jobs or increased imports of goods manufactured overseas.
|Increased Tax Credit
(American Opportunity Tax Credit)
The American Opportunity Tax Credit program will give students a $2,500 tax credit for money spent on tuition, fees, and other eligible higher education expenses. (You'll claim a dollar for dollar tax credit for the first $2,000 and 25 cents on the dollar for the next $2,000.) Note: This credit does NOT apply to your 2008 taxes. It will kick in next year, replacing the existing Hope tax credit, when you're paying your 2009 taxes.
Textbooks and course materials will be included in the expenses eligible for the American Opportunity Tax Credit.
Single filers with an Adjusted Gross Income (AGI) up to $80,000 and joint filers with an AGI up to $160,000 can claim the full tax credit. (Single filers with an AGI between $80,000 and $90,000 and joint filers with an AGI between $160,000 and $180,000 may get a partial credit.)
This credit will function like a tax refund even for people who make so little money that they don't owe any taxes— to cover higher education expenses, low-income individuals and families will be able to claim up to 40% of the tax credit in the form of a tax refund. This new refund feature will allow approximately 4 million additional students to benefit from the program.
Support for working students and parents in school
The economic stimulus bill also provides funding not specifically for college expenses but which will help families hard-hit by the recession. This support assistance includes:
- Increasing tax credits for families with children
- Providing childcare services to an additional 300,000 children in low-income families
- Paying 65% of the total cost of COBRA health insurance premiums for the first nine months of unemployment and offering people who didn't sign up for COBRA when they got laid off a 60-day opportunity to sign up now
- Ensuring that Section 8 Housing rental assistance stays fully available
- Expanding Head Start, special education, and high-support education for disadvantaged students (Head Start is getting the largest expansion since its founding 44 years ago)
- Boosting Teacher Incentive Grants that states use to develop programs for rewarding teachers and principals who raise student achievement and close achievement gaps in high-risk schools
- Helping states offset local budget cuts in elementary, secondary, and postsecondary education
Go back to school with expanded federal financial aid
From increased Pell Grants to refundable tax credits to job training, there's something for everyone in the expanded education benefits of the economic stimulus plan. The federal government is investing a lot of money in providing students with financial assistance for college and career training. If you're out of a job and can't find another one, or if you were already thinking about going back to school, this is the year to do it. You can't get a Pell Grant without filling out a FAFSA, so that's a good place to start.
Source: American Recovery and Reinvestment Act, H.R. 1, 13 February 2009