Monday, February 23, 2009

Economic Stimulus Effects on Paying for College

By: Bovemsa Cheung

The American Recovery and Reinvestment Act of 2009 proposed by President Obama, passed the House of Representatives and Congress and was signed into law on February 17, 2009. The American Recovery and Reinvestment Act of 2009, reduces the stress on families that are worried about paying for college tuition.

In terms of tax credits, the Hope Scholarship tax credit would be temporarily increased. A tax credit lowers your tax bill dollar for dollar while a deduction subtracts money off your taxable income. People can use these credits toward tuition and course materials such as textbooks. However to qualify for a HOPE scholarship, students must be in the first or second year of college.

The Pell Grant is a need-based grant for low-income undergraduate students. 98% of Pell Grants are allocated to students whose family income is under $50,000. This bill would increase the amount a student would qualify for by up to $500. Students would be eligible for a maximum grant of $5,350. In effect, the bill would help 800,000 additional students. In 2009-2010, it is estimated that 7 million students will receive Pell Grants.

The bill would also increase unsubsidized Stafford loan limits. The limit increase is a positive effect for students who now many not have to rely on the private loan market. Federal loans are a lot cheaper than private options.


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