Overview
The nation’s social, civic and economic health relies on the number of students who can attain a college degree. Over the past decade, though, states have cut college budgets, and grant aid for students has stagnated. The number of college students graduating with over $25,000 in student loan debt has tripled in the last decade while 400,000 qualified students drop out of the application process annually due to cost.
President Obama’s budget transforms the federal financial aid system. By cutting excessive lender subsidies and investing instead in the federal financial aid system, students and families will not only receive a significant boost to need-based aid, they will be able to count on that aid year in and year out. Specifics include:
1. Investing $42 billion to make permanent the temporary boost in Pell grant funding achieved in the economic recovery package, and it stabilizes the funding by increasing the grant at inflation + 1% each year from 2011 on.
2. Making permanent the changes to the HOPE higher education tax credit from the economic recovery package, increasing the credit from $1,800 to $2,500 and expanding it to cover key educational costs like textbooks. The renamed American Opportunity Tax Credit also makes up to $1,000 of the credit refundable, enabling 3.8 million families of current high school students from low-income families to use it.
3. Providing a $5 billion increase to Perkins student loan aid which will benefit 2.7 million additional students.
4. Creating a five year, $2.5 billion federal-state partnership to increase graduation rates.
The President’s plan helps to pay for these changes with a $24 billion investment generated by eliminating inefficiencies within the Stafford and PLUS student loan programs, freeing up more taxpayer dollars to go toward the proposed aid programs.
