NAICU Washington Update

Student Aid Big Winner in House Stimulus Package

January 16, 2009

The American Recovery and Reinvestment Act, the House proposal for an economic stimulus package released January 15, would provide the largest boost to student grant aid in history.

The $825 billion package proposes $550 billion for spending, and $275 billion for tax relief. At least $200 billion of the spending is dedicated to education, broadly defined. The entire package was carefully negotiated between House and Senate leadership and the Obama transition team, so we expect it may move quickly through Congress.


Of particular interest to NAICU presidents is the $500 increase in the Pell Grant maximum, and the elimination of the current program shortfall. This means no grants will be reduced due to lack of funding. Instead, this will raise grants for current students, and will bring more students into program. The draft bill also includes a $490 million increase for Federal Work Study to help provide more work-study positions at institutions and in communities; a $2,000 loan limit increase for unsubsidized Stafford loans; and $50 million for student aid administration, to help handle the increase in applications. This is great news for students and families who are on the brink of stopping or dropping out of higher education programs, or are hoping to pursue retraining for a new job.

NAICU presidents ranked raising the Pell Grant maximum as the number one step Congress could take to help ease financial strains on students and families in our recent surveys (see links in the NAICU News Room for survey details). These surveys were invaluable communications to Hill staff during the process of drafting this bill.

One of the key purposes of this legislation is to help create jobs and give the economy a boost. To enlist colleges and universities in that effort, the bill includes $6 billion for higher education modernization, renovation, technology upgrades and energy-efficiency improvements. These funds will flow to states by a formula that takes into account undergraduate FTE enrollment. Governors then will distribute the money based on need at the state level. It is very important that the legislation does not exclude private colleges from this provision.

Priority will be given to projects at institutions eligible for Title III or Title V, Strengthening Institutions Grants; that have suffered a major disaster; or that will increase energy-efficiency and comply with the LEED Green Building Rating System. We know that private colleges and universities have many "shovel-ready" projects that can quickly create jobs at the local level.

There are restrictions on how these funds can be used, such as prohibitions on use of the funds for maintenance; stadiums or facilities primarily used for athletics, exhibitions, or other events which charge general admission; and facilities that are used for religious purposes. The legislative restrictions are borrowed from existing federal higher education facilities law.

The bill also includes $10 billion for science facilities, research, and instrumentation across the science agencies - such as the National Science Foundation, National Institutes of Health, NASA, and Department of Energy - and $100 million for Teacher Quality Enhancement grants.

In an Action Alert on January 16, we asked NAICU presidents to contact their Representatives in support of the student aid funding included in this bill.  A summary of the spending provisions and the legislative language of the proposed bill are both available on the Web.


The House Ways and Means Committee released its proposed tax relief items for the stimulus bill, which includes a provision that would consolidate the Hope credit with the tuition deduction and replace it with a $2,500 credit. The credit would be partially refundable, meaning 40 percent of the amount would be available to low-income individuals with no tax liability. It increases the income limits over current law for the Hope credit, but falls short of matching current law income limits for individuals claiming the tuition deduction. This means that, under the House proposal, there will be both winners and losers.

The Senate is considering a more generous tax provision that would combine the Hope and Lifetime Learning credits, with the tuition deduction, and replace them with a $4,000 credit. This provision, championed by Sen. Schumer (D-N.Y.), would maintain current-law income limits (so no one would lose their current benefit), but this provision is non-refundable. A non-refundable credit is only available to taxpayers with tax liability. All the current law education tax credits are non-refundable - refundability is both expensive and controversial.

It's unclear what the incoming administration's position is on these items. President-elect Obama advocated during his campaign for consolidating the credits, and tying eligibility for a new credit to community service. There are no community service requirements in either the House bill or the Senate discussions.

Next Steps

We understand that the major parameters of the stimulus plan have been carefully negotiated among House and Senate leadership and the Obama transition team. This means it should move quickly through the legislative process and to President Obama's desk for signature.

The first step will be full committee review by the House Committees on Appropriations, Ways and Means, and Energy and Commerce on January 21 and 22. Once the committees approve their pieces, it will all become one bill - akin to an omnibus supplemental bill. The Senate is following a parallel process, with tentative committee mark-ups on a schedule similar to that in the House. We expect details to be released soon. The leadership goal is for the two chambers to conference a final bill, pass it, and send it to the White House before the February 16 Presidents Day recess. This means that key decisions will be made during the NAICU Annual Meeting, with member presidents in attendance poised to be among the most influential advocates in Washington for student aid.

We will keep you informed as new information becomes available, and as we move through the process. And we thank you in advance for your advocacy on behalf of NAICU priorities in this unprecedented legislation.

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