SOURCE: NextStudent

NextStudent

February 24, 2009 11:40 ET

College Students to Benefit From Over $50 Billion in Stimulus Funds

PHOENIX, AZ--(Marketwire - February 24, 2009) - By more than doubling the Department of Education's budget over the next two years, the Obama administration's economic stimulus package will make a reported 4 million more college students eligible for expanded tax benefits and significantly increase federal grant funding for an estimated 7 million students. These provisions of the bill, says NextStudent, will help students reduce their reliance on student loans to help pay for their college education.

"This really marks a new era in federal education spending," said Edward Kealy, executive director of the Committee for Education Funding, the nation's largest nonpartisan education coalition.

The federal Pell Grant program -- the widely used grant program for financially needy students -- will get a $17.1 billion increase in funding, while the federal work-study program will receive a $200 million boost.

A new tax credit will temporarily raise the currently available maximum education tax credit by 40 percent, from $1,800 to $2,500. The approved stimulus bill also expands eligibility for the education tax credit by opening up the benefit to students from lower-income families who don't currently pay taxes. The new tax credit will be refundable up to 40 percent for those families who don't owe any taxes, and all eligible families will be able to write off non-tuition expenses like textbooks.

Under the current Hope Scholarship Tax Credit program, the education tax credit is nonrefundable, meaning only those families who owe taxes are able to benefit from the tax credit. The current Hope credit also covers only tuition and fees, leaving many low-income students with hefty room and board, transportation, and textbook costs that they can't count towards the tax break.

The final version of the stimulus bill doesn't include a measure proposed by the House of Representatives that would have temporarily increased federal subsidies to third-party lenders providing federal parent and student loans under the Federal Family Education Loan Program. Most FFELP lenders have suspended their federal student loan programs after Congress passed legislation in 2007 cutting over $21 billion in federal lender subsidies.

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