During his campaign Obama promised to "make college affordable to all Americans." With his stimulus plan and his proposed budget he has taken the first steps towards making college affordable.
The stimulus will increase funding to financial aid programs and offers a $2500 tax credit to students.
Obama's proposed budget makes most student loans come directly from the government and will also make the Pell grant maximum indexed to inflation. The budget still has to go through Congress, so everything on it is subject to change.
Work study and Pell grants are getting a boost with Obama's stimulus.
The stimulus is increasing the maximum amount of money that Pell grants can give by about $483 per year. Obama has also proposed to index Pell grants to inflation with his 2010 budget according to the Wall Street Journal.
"One of the biggest benefits for EvCC is the increased Pell grant funding," said Laurie Franklin, director of student financial services at EvCC. "We only have a limited amount of funding per year and we usually give it on a first come, first serve basis. With this increased funding we may have more money to spread around for more students," said Franklin.
Obama's budget also makes Pell Grants an entitlement program, like Social Security, which means that a set amount of money would be allocated to it each year instead of Congress having to decide each year how much money they will put into it.
Work study is also receiving a $200 million increase in funding nationally. That will be an estimated $3,279,508 for Washington State according to ed.gov. Washington State had a total of $16,077,662 in work study last year, according to ed.gov.
Each school gets a lump sum of money for work study at the beginning of the year, and our allocation this year was less than last years allocation according to Franklin. The boost from the stimulus may only make up for what we've lost and not actually increase the total amount of students on work study, said Franklin.
The budget crisis is likely the reason we are getting less work study money than last year, said Franklin.
The American Opportunity tax credit, which passed as part of Obama's stimulus plan, gives a $2500 tax credit to students for the 2009 and 2010 tax seasons.
Tax credit is a "dollar for dollar reduction of your tax bill," said Pat Coughlin, an accounting teacher at EvCC. Your tax bill is the amount of money you owe to the government.
While a deduction will reduce the amount of income you have that is taxed, credit will reduce the amount you actually owe to the government. This means that credit is a stronger tax cut than a deduction, said Coughlin.
To claim the tax credit you write it under the "education credits" section of your taxes.
"Education credits" is line 31 on the current 10-40A tax form.
This tax credit is up to 40 percent refundable, so low-income families and students may see their refund checks increase by up to $1000.
The tax credit is gradually reduced for those with a gross income over $80,000, or $160,000 if you file your taxes jointly.
The $2500 is an increase from the Hope scholarship tax credit, which was only $1800 and not refundable at all. Also while the Hope scholarship tax credit could only be claimed for two years, the American Opportunity tax credit can be claimed for up to four years.
During the election Obama had promised a $4000 fully refundable tax credit for students in exchange for community service.
The American Opportunity tax credit will expire after two years unless Congress renews it. However, Obama's proposed budget makes the tax credit permanent.
Obama's new budget proposes to give out more student loans directly from the government instead of private banks.
Currently, most student loans are handled privately by companies like Sallie Mae and the government provides subsidies to these companies. Obama wants to lend directly to the students from the government and has proposed this change in his 2010 budget, according to the New York Times.
Obama has said that reducing subsidies to banks and giving loans directly to the students will save the government up to $4 billion.
EvCC works with exclusively private loans and if we do switch to federal loans it would be a significant impact on our school, said Franklin.
Franklin, who has worked in schools that work with federal loans and schools that work with private loans, said that private loans do have some advantages.
Private loans offer more choices and flexibility to students who want to choose their own repayment plan. "They have a wider range of choices with private loans," said Franklin.
"If we do move in that direction there needs to be accountability, the government needs to keep the students in mind when designing the loans," said Franklin.