The Congressional Money Tree’s Focus on Education

Copyright (c) 2009 Marc Hill

In recent days the Democratic Leaders of the House of Representatives have publicized their plan to address the economy with a massive $825 billion dollar stimulus package designed to, well you know, I haven’t quite figured this one out yet. I ‘m still stuck on the first stimulus package of $700 billion -or was it $725- I’m sure it was seven hundred and something.

At this rate of spending and future taxation (coming soon to your doorstep), it’s irrelevant. To add anxiety to an already frightening non stop spending binge, the leaders in the Senate are working on their own stimulus version of “let’s make a deal with the taxpayers.”

So as we calculate the age of our great (or maybe great, great) grandchildren will be when they stop paying for this lunacy, the congressional draft does shed light on what our elected officials are thinking in terms of providing assistance with higher educational costs. So let’s take a look.

The draft directs $15.6 billion to increase Pell Grants by $500, to $5,350, in the 2009-2010 school years. Pell grants do not have to be repaid and you must demonstrate financial need (FAFSA must be filed) in order to be considered. Most Pell awards go to students with the highest financial need with family incomes below $30,000. This is certainly in line with the founding philosophy behind the Pell grant and with then candidate Obama’s desire to make college more affordable to people who demonstrate the highest economic need.

In line with the above economic need principle, the draft directs an additional $490 million to the work study program. Work study programs provide part-time employment to students during the school year based on financial need (FAFSA must be filed) to assist with college costs. The Federal government pays a portion of the student’s salary, making it economical for businesses and university departments to employ the student.

The draft also calls for an increase in federal limits to the Unsubsidized Stafford Loan. Unsubsidized Stafford loans are federally guaranteed loans that are not based on financial need; however, you must submit the FAFSA application for consideration. Interest or payment of principle can be deferred until six months after graduation or six months after you drop below half time status as long as you capitalize the loan. In effect, this adds the deferred interest to the balance of the loan thereby increasing your debt.

The congressional draft also calls for the simplification of the educational tax credits. It directs $12.5 billion to replace the Hope tax credit (current credit is $1,800 for the first $2,400 in qualified educational expenses during your child’s first two years in college assuming income qualifications are met) with a new credit worth up to $2,500 coupled with an increase in income limits so that more may take advantage of this credit. And to be fair to those individuals who don’t pay enough in taxes to qualify for this new credit, our esteemed collegeas in Congress propose a partially-refundable credit of 40 percent of the $2,500 (equally $1,000) for these folks. Sheesh!

Another $79 billion over two years for the newly created fund called the “State Fiscal Stabilization Fund.” This money is given to states with direction to its governors to spend the money in such a manner as to restore their K-12 and higher education budgets to their 2008 levels. The governors only have to spend 61 percent of this money as above, which leaves an additional 39 percent to be spent on “public safety and other governmental services.”

Finally, for the most underfunded part of the Draft, $50 million to the Department of Education for “oversight” purposes. Good old oversight, how in the world could we forget this. It worked like a well oiled machine in the first stimulus package.

As far as I can see and keeping college in mind, this represents the most significant aspects of the draft that directly affects families. Additional money is being spent on grants for research on energy, greenhouse gases, and rebuilding of infrastructure.

How much and in what form any of this will actually occur is anybody’s guess. Secretary of Education- elect Arne Duncan indicated during his confirmation hearing that he believes in increasing federal investment in college tuition.

In this light, the draft increases the maximum Pell Grant to $5,350 plus additional work study dollars (average work study award $1,600) with a refundable tax credit of $1,000, representing a total of $7,950 in free money to this group. Mission accomplished- it’s anybody’s guess since the mission has not been clearly stated and more input is forthcoming.

The only person to date that hasn’t chimed in on the specifics is the President. However, as stated earlier, much is in line with the then candidate’s beliefs that more funding needs to be directed to students of economically challenged parents. Considering his lobbying efforts on behalf of the draft, the conclusion may be that he is pleased.