NAICU Washington Update

Inside the Stimulus Bill

February 23, 2009

President Obama signed into law the American Recovery and Reinvestment Act, also known as the "stimulus package," last Tuesday to help jump start the failing American economy.

NAICU and member private college presidents have been working non-stop since November to ensure that student aid would be considered a stimulus item, and to ensure that private colleges would be eligible, should any funds go toward higher education construction.

In the end, private colleges fared very well, considering the back and forth between chambers and negotiators.  After quick passage in the House on January 28, then a week of behind-the-scenes dealing in the Senate, the bill finally passed on February 13.  Throughout the deal-making, student aid was on and off the table multiple times, given that many members of Congress didn't see the economic impact of education funds.

Students are the Big Winners

The original House bill had $17 billion for a $500 increase in the Pell Grant maximum for the next two years and pay-off of the program shortfall; a $2,000 loan limit increase; $490 million for Federal Work Study; and $50 million for student aid administration to handle increased applications. The original Senate bill had $13 billion for a $400 increase in the Pell Grant maximum and no shortfall pay-off; and $61 million for Perkins Loan capital.

The first draft of the bipartisan compromise lead by Sens. Ben Nelson (D-Neb.) and Susan Collins (R-Maine) took out all student aid funding.  In the final bill, however, support for students prevailed, with inclusion of the House's Pell Grant provision, increasing the maximum grant to $5,350 2009-10, and $5,550 for 2010-11.  Also in the final bill is $200 million for community service in work study; and $60 million for student aid administration.

Presidents in Washington, D.C., for the NAICU Annual Meeting in early February played a key role.  In their Hill visits, they turned around key Nelson-Collins negotiators by showing that an investment in Pell Grants has a ripple effect beyond the student receiving the aid -- helping the college to keep jobs filled, purchase goods, and remain a strong part of the local economy.

Another big win for students, non-controversial with bipartisan support, is the new $2,500 American Opportunity Tax Credit, which temporarily replaces the Hope tax credit for postsecondary education.  This new tax credit expands eligible expenses beyond tuition and fees to include textbooks; expands income caps to $80,000 for single filers and $160,000 for joint filers; and makes the credit 40 percent refundable. The $13.7 billion provision will help thousands of private college students and their families.

Construction a Tough Sell

"Shovel-ready" construction projects immediately creating jobs were a top priority in the stimulus legislation. Bridges, roadways, railways, science labs, and other non-residential categories are included throughout the bill.

The original House and Senate versions of the bill both included funding for renovation, repair, and modernization at institutions of higher education, but not new construction. Beginning last November, NAICU worked to ensure that private non-profit institutions of higher education would be eligible, along with public institutions, for these funds if included in the final bill. 

We argued that (1) that the federal government historically has not distinguished between public and private non-profit institutions in legislation, and (2) that these credit-worthy institutions have many "shovel-ready" projects that have been delayed as our colleges have reallocated budget dollars to first cover the aid needed to keep students in college.  NAICU presidents conveyed this message in conversations with their members of Congress, changing many perceptions of private colleges on the Hill.

Once the final deal-making got underway, though, the notion of "school construction" got bogged down in doubts on local school districts' ability to move quickly on projects and create jobs, and higher education modernization got swept up into that problem.

In the end, there is no funding in the bill specifically for higher education modernization.  However, the State Stabilization Fund provision of the bill stipulates that governors shall use part of their fund for "public safety and other government services, which may include . . . modernization, renovation, or repair of . . . institutions of higher education facilities . . ."  Also included is a stipulation that "a governor shall not consider the type or mission of an institution of higher education, and shall consider any institution for funding for modernization, renovation, and repairs within the state."

While there is less money for higher education modernization than proposed in the original bills, NAICU feels strongly that the inclusion of this language is extremely important confirmation of the established equal treatment of private non-profit and public institutions by the federal government.

Resources on the Stimulus Package

NAICU has prepared a summary of higher education provisions in the bill, noting areas in which we believe private colleges are eligible to compete under this bill.  Also, the Department of Education has created both a dedicated Web page on the American Recovery and Reinvestment Act (ARRA), where additional information on the act will be posted as it becomes available,  and a new Web site offering many additional resources on the ARRA.