Obama, Higher Education, & the Stimulus Package
American Reinvestment & Recovery Plan Includes Pell Grants, Tax Cuts
Jan 26, 2009
President Barack Obama's proposed American Reinvestment and Recovery Plan – known more colloquially as the "stimulus package" – is a plan to invest $825 billion of government spending and tax cuts into the sagging economy. Obama wants to spend a portion of this money on higher education.
Obama's main goal is to combat the educational affordability crisis in America. After all, the price of college tuition and fees have jumped 439 percent in the last 25 years – which is three times the rate that median incomes have climbed – and at this rate, college may become unaffordable for the majority of Americans by 2030. [1] To stay globally competitive, an educated workforce is necessary, and therefore Obama wants to combat the college affordability crisis now.
So how does Obama propose America invests its money in higher education? The American Reinvestment and Recovery Plan proposes three strategies: an increased number of Pell Grants, a $2500 tax break for many college students, and an increase in student science fellowships.
Pell Grant Increases
Pell Grants are federally funded grants to help low income students pay for higher education. Eligibility for these grants is determined by the financial situation of a student and his or her family based on their Free Application for Federal Student Aid (FAFSA) form.
For the 2008-2009 school year, the maximum allowable annual Pell Grant is $4,731. This only covers about one-third of the cost of a year at a public four year college or university. Unfortunately, the federal financial aid budget was cut by over $12 billion in 2006, so it has not been possible to increase the Pell Grant maximum significantly.
Obama wants to raise the Pell Grant maximum by $500 annually.
The American Opportunity Tax Credit
The American Opportunity Tax Credit is a proposed $2500 partially refundable credit for college students and their families. The tax credit will only be for low income students. Approximately four million students will be eligible.
This new credit will temporarily replace the Hope Tax Credit, which is a nonrefundable credit of $1650 per year that is only good for a student's first two years of school. Approximately 20 percent more students are expected to be eligible for the American Opportunity Tax Credit than they are for the Hope Tax Credit.
Student Science Fellowships
In addition, Obama wants to invest money in science education and innovation. He proposes that science grants for both undergraduate and graduate students be tripled.
Higher Education and the Obama Administration
As of yet, it is unclear how higher education will be impacted during the Obama administration. It is clear, however, that Obama has made the educational affordability crisis at least somewhat of a priority.
Source:
[1] Tamar Lewin, "College may become unaffordable for most in U.S.," The New York Times, December 3, 2008.
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