A $500 increase for the maximum Federal Pell Grant and a $3,000 tax credit that would replace the Hope tax credit and the tuition and fees tax deduction are reportedly being considered as part of a second economic stimulus package that could cost more than $800 billion.
These numbers could change as the House and Senate Appropriations Committees have not finalized their drafts of the legislation. Drafts are expected later this week this week. However, the emerging bill is expected to use education spending a primary avenue to provide federal aid to states that are facing rising budget deficits due to the recent economic turmoil.
"We realize that this process is far from complete. However, we are excited that Congress appears ready to take meaningful steps to help students and their parents who are struggling to pay for college by adopting a primary recommendation by NASFAA and other higher education advocates," said NASFAA President and CEO Phil Day. "If Congress approves this much needed Pell increase, it will significantly help the nation's neediest students access college, remain enrolled, and complete their degree or certificate program with less student loan debt."
Politico reports that Democrats in Congress are proposing a $15 billion expansion of the Pell Grant program. However, leaders in Congress are also exploring ways to limit the cost of the stimulus package and are considering a block-grant system that could expire after two years. This would keep funding increases from being included in the base funding of existing programs. Again, the details remain unknown and it is unclear at this time if a Pell increase would be included in this block-grant system.
The current plan for the economic stimulus "would accelerate a planned $500 increase in the annual grant for low-income students; the new level would to $5,231 and the estimated cost about $15 billion over two years," according to Politico.
The total package is expected to include roughly $500 billion in economic stimulus spending and a roughly $300 billion tax relief package. This tax relief package is expected to include a $3,000 tax credit that would replace the Hope tax credit and the tuition and fees tax deduction. The Lifetime Learning tax credit would not be affected.
The proposed tax credit would simplify the education tax benefit system and "provide more money than current tax benefits," according to The Chronicle of Higher Education.
The proposal provides an annual $3,000 tax credit to undergraduates for tuition and eligible expenses and for the first two years of graduate school. A $1,500 tax credit would be given for those who don't earn enough to owe taxes.
The Chronicle reports that a spokesman for the House Ways and Means Committee, which is developing the tax portion of the economic stimulus package, said he "feels pretty confident" that the new tax credit will be included in the legislation.
Additional Media Coverage
Economic-Stimulus Bill Is Likely to Include Increase in Pell Grant The Chronicle of Higher Education
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