Dons Dollars and Cents: Economic Stimulus Package

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Hated by Republican congress members, and business owners , and loved by Democrats and the unemployed, the American Recovery and Reinvestment Act of 2009 seems to have polarized the American public, and even economists, who cannot agree on whether the bill will pull the economy out of tailspin or just greatly increase the size of government, as well as government debt, for years to come.

For college students, who would have hoped for the Democrat-controlled government to aim stimulus money at making college more affordable, there is disappointingly little in the enormous package to get excited about.

Less than four percent of the $787 billion economic relief effort will be spent on college students, in the form of expanded Pell Grants and Federal Work Study and increased tax credits for education spending.

The bill calls for $15.6 billion to increase Pell grants from $4,731 currently to $5,350 in 2009 and to $5,550 in 2010. Pell grants do not have to be repaid and students who qualify will receive anywhere from $400 up to the maximum amount depending on their level of need as determined by their FAFSA.

However, these grants go to only the poorest college students; 90 percent of Pell grants awarded in 2008 went to students whose families made less than $40,000 per year, according to a report by the New York Times.

The stimulus package also calls for about a 17 percent, or $200 million, increase in funding for the Federal Work Study program which subsidizes the cost of hiring student workers by chipping in part of their wages. Work study allows employers, especially campus departments and non-profits, to hire more workers, or workers they otherwise wouldn’t be able to afford.

This is important at USF, where campus departments are facing tighter funding and some are reducing student hours or laying student workers off all together. Non-work study student workers are also seeing their hours cut more dramatically than those with work study, as was reported in the Feb. 19 issue of the Foghorn.

In the bill, Congress also increased tax credits for education spending, up to a maximum of $2,500, made the credits refundable, meaning tax payers who owe less in taxes than their education credit will get a refund, and increased eligibility to families making less than $180,000, up from $116,000 last year. The credit will go either to students or to their parents if the student is claimed as a dependent and is up from a similar $2,000 credit last year.

Total spending on college funding in the bill comes to just $29.8 billion, a small fraction of what has been set aside for other programs including Medicaid spending and tax cuts.
While students should support efforts to increase economic activity in hopes of securing well-paying jobs upon graduation, there is little in this bill that increases federal support for higher education or reduces the incredible cost of obtaining a degree.

However, the Obama administration plans to include further support for college students in its fiscal year 2010 budget, including making some of the programs mentioned above permanent.
The impact of Obama’s budget changes on college students will be profiled in a forthcoming Dons Dollars and Cents column.

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