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by Emily

While it falls in the middle of summer on most academic calendars, July 1 marks an important date for financial aid each year.  On July 1, the Education Department switches from the 2008-2009 academic year to the 2009-2010 one, and new federal rules for financial aid go into effect. This means new loan consolidation and repayment options, lower interest rates on some federal student loans, among other changes for students receiving federal student financial aid.

One big change you likely already know about if you have applied for financial aid for fall is that Pell grants are going up from a maximum of $4,731 for 2008-2009 to a maximum of $5,350 for 2009-2010.  This change has already been widely publicized and is already reflected on your financial aid award letter.

Changes for current undergraduate students that you may not already know about include lower interest rates and lower loan fees on federal Stafford loans.  The interest rate on subsidized Stafford loans for undergraduate students will drop from 6.0 percent to 5.6 percent on July first.  Rates will not change for unsubsidized loans, graduate students, or federal PLUS loans.  The upfront loan fees on all Stafford loans will fall from 2 percent to 1.5 percent. Students who have older Stafford loans or PLUS loans with variable interest rates will also see lower interest rates as of July 1, provided they have not already consolidated their loans.

Those who are considering loan consolidation will see one of the biggest changes on July 1, with the unveiling of a new consolidation program through the federal Direct Loans program.  It will allow students to participate in an income-based repayment plan that will forgive any outstanding debt after 25 years.  Payments will be capped at 15 percent of whatever you earn above 150 percent of the federal poverty level and no payments will be required if your earnings fall below 150 percent of the federal poverty level.

Finally, since July 1 marks the start of the new academic year for financial aid, today is the last day to file a 2008-2009 FAFSA.  If you are planning to enroll in summer courses and have not yet applied for aid, you may want to check with your school to see whether summer is counted as part of 2008-2009 or 2009-2010 for financial aid purposes.  If your school counts summer as part of the previous academic year and you have not yet filed a FAFSA, you will want to do so right now.

by Agnes Jasinski

Sen. Edward Kennedy, a U.S. Congressman for more than 40 years, has left behind a long history of higher education programming, including the passage of an act last summer that expanded grant funding for low income students.

Kennedy died late Tuesday from the cancerous brain tumor he was diagnosed with in May of last year. One of his most recent efforts was working to pass the Higher Education Opportunity Act last August, which reauthorized the Higher Education Act for the first time since 1998. The act increased Pell Grant maximums, reaffirmed several scholarship programs, including the Robert C. Byrd Honors Scholarship Program, implemented loan forgiveness programs for eligible teachers and services in areas of national need, and detailed requirements that lenders provide borrowers with more information before issuing loans. The focus of the latest reauthorization was on expanding opportunities for scholarships and grant funding and streamlining the federal financial aid process in the wake of rising tuition costs and a more competitive student loan industry.

Kennedy had a long history of crafting higher education and student financial aid programs beginning with his work in 1972 on Pell Grants and Title IX, which prohibits the discrimination of women in education institution and has become known for increasing the number of women participating in college sports typically dominated by men. An article in the Chronicle for Higher Education today describes him as a "lifelong champion of equal rights and educational opportunity," attributing to him much of the work that went into the implementation of the federal direct-loan program introduced in the 1990s. The program allowed the government to lend money directly to students through their colleges.

>Kennedy, while not without his share of controversies, was able to get much of his work done through compromise and friends in the Republican base. Still, he was not without his critics. He publicly expressed his displeasure when the No Child Left Behind Act, legislation he had worked on with a number of Republican lawmakers, was passed with restrictions on grant aid to high-achieving math and science majors. In 2003, Kennedy attempted to move a bill through that would target colleges that gave preference to children of alumni, a timely topic today in the wake of the admissions controversies at several Illinois universities. His ties to his home state were obvious in much of his work in higher education, as Kennedy opposed any legislation that would impact the amount of student financial aid available to Massachusetts students

Eunice Kennedy Shriver, the Senator's sister and the founder of the Special Olympics, died earlier this month. Jean Kennedy Smith is the last surviving Kennedy daughter.

by Emily

While it's still a long way from becoming law, the first published draft of the economic stimulus legislation created by the House of Representatives includes billions of dollars for higher education, including several provisions designed to make paying for school easier.  The bill still has to be approved by both the House and the Senate (which is drafting its own stimulus legislation) then signed by the President, so it remains to be seen how many of the following appropriations will make it into the final version of the stimulus package.

The stimulus bill would increase funding to several federal student financial aid programs, as well as providing emergency funds to states to prevent further drastic budget cuts, and designating money to help colleges, especially ones affected by disasters, make needed improvements and repairs.  If the bill is passed, federal work-study will receive a boost in funding, as will Pell Grants, eliminating a projected budget shortfall for the program.  Unsubsidized Stafford Loans will increase by $2,000 per year, bringing the loan limit to $7,500 or more for undergraduate students.  The maximum Pell Grant award will also increase to $5,350.  In addition, lender subsidies will also increase, hopefully enticing more banks to remain in the FFEL program.  The Hope tax credit and a provision that allowed families to deduct up to $4,000 in educational expenses will also be combined into a new $2,500 tax credit, through which families with too little income to file taxes could still receive $1,000.

As Congress hammers out the details of the stimulus bill in coming weeks, these numbers will likely change.  A more detailed breakdown of these and other proposals affecting colleges and universities is available from Inside Higher Ed.

It's looking like federal student financial aid will be increased in the forthcoming economic stimulus package, at least based on the legislation presented in each house of Congress in its current form.  While the House stimulus bill contains more aid for education, the Senate bill also proposes higher education tax benefits and increases in Federal Pell Grant funding.

The House bill promises:

• $15.6 billion to increase the Pell Grant by $500 to $5,350 and fully fund the increase
• $490 million to Federal Work-Study
• $12.5 billion over the course of 10 years to offer a $2,500 tax credit that will be 40% refundable for those who would otherwise make too little to qualify
• $6 billion to higher education infrastructure
• $1.5 billion to improve energy efficiency for colleges, schools, and local governments
• $39 billion to school districts and state colleges
• $25 billion to states for "high priority needs" which can include education
• a $2,000 increase in loan limits on federal Stafford Loans

The Senate bill appropriates:

• $13.9 billion to increase the Pell Grant by $281 in 2009-2010 and $400 in 2010-2011 and fully fund the increase
• $12.9 billion to create a 30% refundable $2,500 tax credit
• $61 million to Perkins Loans
• $3.5 billion to improve energy efficiency and infrastructure on college campuses
• $39 billion to school districts and public colleges
• $25 billion to states for "high priority" needs which may include education

The House bill also includes money to improve financial aid administration and further assist student loan lenders, while the Senate bill will allow computers to be counted as education expenses towards which 529 plans can be used.  The bills are facing some Republican opposition, especially regarding education spending, as it's been argued that construction projects and increases to student financial aid will not directly and immediately benefit the economy.  As Congress and the White House continue to hash out the details of these bills, amounts are likely to change.  But for now, it appears that colleges and college students may receive a little extra financial aid from the government this year.

by Suada Kolovic

From the get go, the DREAM Act, which would provide a path to citizenship for undocumented college students, has faced an uphill battle. With it failing in the Senate last year and both sides expressing skepticism about the bill, U.S. Secretary of Education Arne Duncan told Congress yesterday that the Administration supports its passage.

According to Duncan, the students who could benefit if Congress approves the DREAM Act would fill 2.6 million jobs and would bring in $1.4 million more in revenue than it would cost over the next 10 years. Duncan also addressed several misconceptions about the DREAM Act: It does not create an amnesty program with an easy path to citizenship, it will not affect the availability of federal student loans or Pell Grants for citizens and it will not create incentives for an increase in undocumented immigration. “Simply put,” Duncan concluded, “educating the individuals who would be eligible under the DREAM Act would benefit our country.”

Keep in mind that in order for undocumented students to qualify for the DREAM Act, they must prove they came to the United States before the age of 16, have lived here for at least five years, graduated from high school or received a GED, possess good moral character and been admitted to an institution of higher education or serve in the military. Do you hope the DREAM Act becomes a reality? Let us know what you think.

by Emily

With all the talk about spending and stimulus legislation and bailouts, it can be easy to lose track of what benefits taxpayers can actually expect to receive. Most likely, everyone knows that the American Recovery and Reinvestment Act, perhaps better known as “the stimulus,” will create jobs through funding “shovel-ready” projects and will put a little extra in paychecks through a tax rebate that will take effect this summer.  You probably also know that there’s also financial aid in there for education, but you may not be sure exactly what.

Frankly, so much federal legislation and talk of change has been floating around in the last two years that anyone who last paid a tuition bill as recently as 2007 probably doesn’t even recognize financial aid in 2009.  To help, we’ve prepared a breakdown of where student financial aid stands currently.

Pell Grants. The American Recovery and Reinvestment Act increased the maximum Federal Pell Grant award from $4,731 for 2008-2009 to $5,350 for 2009-2010.  The maximum Pell award will go up again in 2010-2011 to $5,500 under this legislation.

The income threshold to qualify for federal grant programs also increased.  Now students with an expected family contribution (a number determined by completing the FAFSA) of up to $4,671 (up from $4,041 this year) can qualify for Pell grants.  They will not receive the whole award, but even the minimum award has increased—from $400 for full-time students in 2007-2008 to $976 for the same group in 2009-2010, due in part to the College Cost Reduction and Access Act, which increased all Pell awards by $490.

Students qualifying for Federal Pell Grants can also pick up additional college funding through Academic Competitiveness Grants or SMART grants, which include Pell eligibility in their criteria.  Many non-federal college scholarships and grants also use Pell eligibility to determine awards, so the newly Pell-eligible will definitely want to do a scholarship search to see what’s out there.

Work-Study. More students will also see “federal work-study” on their financial aid award letter in 2009-2010 thanks to the economic stimulus legislation.  More money is available to work-study programs that allow students to get a part-time job on (or occasionally off) campus and count the income as financial aid.  Work-study programs provide great job opportunities for student workers, and since the money is given in the form of a paycheck, students can use these funds to pay their tuition bills or to cover living expenses.

Tax Benefits. One of the biggest perks of the American Recovery and Reinvestment Act is the creation of the American Opportunity Tax Credit, which replaces the Hope Credit.  The tax benefits under Hope only went up to $1,800 and only could be taken for two years.  The American Opportunity Tax Credit can be used for four years, can fund up to $2,500 of college costs (100% of the first $2,000 plus 25% of the next $2,000, for a total of $2,500), and up to 40% is refundable, so people who don’t pay as much in taxes as they would qualify to receive in the credit can still get something.

Additionally, the income level at which the American Opportunity Tax Credit phases out is higher than the Hope credit, allowing individuals with incomes of up to $90,000 and married couples with incomes of up to $180,000 to take it.

Families will be able to start taking advantage of the American Opportunity Tax Credit on their 2009 taxes.

Other Benefits. Much more is included in the American Recovery and Reinvestment Act.  For example, students with 529 savings plans can now use that money to purchase a computer for school.  Additionally, states will receive billions of dollars over the next two years, with a portion of the money devoted specifically to funding projects at public institutions of higher education, as well preventing or reversing massive reductions in state education spending.

While student loans stayed the same in the stimulus, they did receive a boost in the fall through the continuation of the Ensuring Continued Access to Student Loans Act, as well as other recent legislation, including some new aid to lenders.

If you’d like to read more about how recent legislation has affected paying for college, our blog archives feature breakdowns of the 2007 College Cost Reduction Act, the 2008 Higher Education Opportunity Act, the 2008 Ensuring Continued Access to Student Loans Act, the 2008 GI Bill, and more examples of what's going on with college in Congress.

by Suada Kolovic

Unless you’ve taken residence under a rock for the past few weeks, you’ve heard about the debt ceiling crisis. Thankfully, the White House and Congress have reached a deal to raise the nation’s borrowing limit and shrink the federal deficit which avoids many of higher education’s worst-case scenarios, namely cuts to Pell Grants, the end of subsidized student loans or a government default that would leave student financial aid and other funding for colleges in limbo.

Here’s the breakdown: The agreement would cut $1 trillion right away and create a committee to reduce the deficit by another $1.5 trillion by November. If approved in Congress, it will avert default on the nation’s debts and ensure that the government has enough money for federal benefits, including student aid. In layman’s terms, the bill would provide $17 billion for the Pell Grant program but the measure would only be temporary. Because House conservatives oppose tax increases, it is likely that the committee charged with reducing the deficit will favor spending cuts over revenues increase, putting Pell Grants and other student aid programs at risk for cuts in the near future.

Do you think slashing funds for higher education is problematic? Let us know what you think.

by Kara Coleman

If you’re one of the more than nine million undergrads who depend on Pell Grants to pay for school, you have probably been pretty anxious over the past few weeks.

This past February, the United States House of Representatives passed a Continuing Resolution which would slice the federal budget drastically. One of the programs to be affected by the cut is the Pell Grant program. The maximum amount of funds available to college students would be lowered from $5,550 to $4,705 and the changes were set to take effect for the 2011-2012 academic year.

Students were able to breathe a sigh of relief when the Pell Grant program, which has long received bipartisan support from the Senate, was able to avoid major cuts after all. The debt-ceiling bill passed earlier this week will limit overall discretionary spending to $1.043 trillion in the 2012 fiscal year. Since that’s about $7 billion below the current level of spending, how will students be able to receive their maximum Pell Grants? Grad students will be the ones taking the hit. At the moment, graduate students with federally subsidized student loans don’t have to be concerned with interest until after graduation but under the new plan, interest on these loans will begin to accrue while they are still working towards their degrees.

National Economic Council director Gene Spurling says of the bill, “This is a compromise budget, but one that we believe makes the necessary room for the most important investments in winning the future in innovation and research and education.”

How do you feel about these changes? For those with dreams of advanced degrees, are you already researching alternate funding options for graduate school?

Kara Coleman lives in Gadsden, Alabama, where she attends Gadsden State Community College. She received the school’s Outstanding English Student Award two years in a row and is a member of Phi Theta Kappa. She plans to transfer to Jacksonville State University in August 2011 to study communications with concentration in print journalism. Kara’s writing has been featured in Teen Ink magazine and she is a children’s book author through Big Dif Books. In her spare time, Kara enjoys reading, painting, participating in community theater and pretty much any other form of art.

by Alexis Mattera

Did you know that more than 70 colleges across the country have replaced loans with grants? That’s right: Schools are offering more free money to entice students to enter their hallowed halls, meaning they will not be saddled with the often-dreaded student loan payments after graduation. What institutions come out on top? Here are a few of the best aid policies, courtesy of the Washington Post’s Daniel de Vise:

• Princeton University: The Tigers lead the pack time wise, first cutting loans in 1998 and nixing them completely in 2001.
• Harvard University: After eliminating loans in 2008, Harvard implemented a “zero to 10” standard, which pledges families earning up to $180,000 will pay 10 percent of their income at most toward college-related fees.
• Amherst College: The school replaced loans with grants and work-study for all students in Fall 2008 and the number of students eligible for Pell grants has nearly doubled to 23 percent as a result.
• Claremont McKenna and Pomona: Loans were also phased out here in 2008 but not just to help poor students. Roger Huddle, a rising Pomona senior with a household income approaching $100,000, received enough aid to cover roughly two-thirds of the full cost of attendance.
• Yale University: The New Haven-based Ivy meets full demonstrated need without loans, capping the contribution at 10 percent of income for families earning up to $130,000.

For de Vise’s complete top 12, click here. If your school made the cut, are you reaping the financial benefits? If your school is not represented, how are you paying for your degree?

by Alexis Mattera

The Federal Pell Grant program as we know it has been in jeopardy in recent years but an agreement reached last night will keep its funding intact. While college students will still receive the maximum award amount per year, the number of eligible recipients is a quite different (and unfortunate) story.

The Chronicle reported congressional leaders agreed on a spending bill for the remainder of the current fiscal year that would increase funds for the National Institutes of Health by 1 percent, thereby maintaining the maximum Pell Grant amount of $5,550. To make this $300 million increase possible, however, eligibility for the award has been restricted. Under the bill, Pell Grant funding will only be available to each student for six years instead of nine, high school diplomas or GEDs will be required (no more ability-to-benefit tests) and the income cap for receiving an "automatic zero" expected family contribution will be lowered from $30,000 to $23,000. The interest subsidy on undergraduate student loans during the six-month grace period after a student graduates would also temporarily end.

Yes, the changes are significant but they are far less severe than an earlier bill which would have lowered the income cap to $15,000 and reduced the amount of income working students could exclude when applying for financial aid – changes that would have negatively impacted thousands of college students, especially those attending community colleges. We want to know what you think about the news. Is there a way to maintain federal funding without decreasing eligibility or do you think this bill is the best option?