While billions of dollars are being poured into the economy to build, buy and bailout, there’s also federal spending underway to help spur a student stimulus.

The American Recovery and Reinvestment Act, known as the stimulus package, will pump $30.8 billion into making college more affordable for students and their families.

The main avenue for the additional funding will come through the Pell Grant Program and increased tax credits.

“This is definitely going to benefit Oklahoma college students,” said Bryce Fair, associate vice chancellor for scholarship and grants of the Oklahoma State Regents for Higher Education. “We already have tens of thousands of students receiving Pell Grants, and there will be an increase in students eligible for partial grants.”

Federal Pell Grant Program

Approximately $17 billion will be added to the Pell Grant Program, a program that allocates need-based grants to low-income students, and will impact about 7 million students nationwide, according to the U.S. Department of Education Web site.

The additional funding will increase the amount of money available to students through the program by $500, allowing students to receive a maximum $5,350 in grant money during 2009-2010, and more in the following year.

But the increase in funding will do more than boost the amount allocated through Pell Grants. It will also provide assistance to students who are new to the Pell Grant Program.

“As more people suffer from the economy, more people are eligible for this program those that are becoming eligible will need funding,” said John Laughner, legislation manager for the Committee for Education Funding, the nation’s largest nonpartisan education coalition.

During the 2006-2007 award year, there were 72,318 Oklahoma recipients of Pell Grants, according to the 2006-2007 Federal Pell Grant Program End-of-Year Report, but Fair said the number of Oklahoma recipients is likely to increase in the next few years and additional funding will help curb students’ cost.

The additional funding will also help bridge the shortfall in grant funding, Laughner said.

The U.S. Congress allocates the money for the Pell Grant Program, but it underestimated the funding needed because of an increase in eligible students, which resulted in the previous shortfall, he said.

Last year, there was a shortage of about $3 billion for the Pell Grant Program, causing students eligible for the grant not to receive their full funding.

The money being added to the Pell Grant program will help ensure all eligible students will receive their funding, Laughner said.

Tax Credits

Another way the federal government is trying to curtail the cost of higher education is by implementing greater tax credits, which would give students more money back after filing tax returns.

According to the Department of Education’s Web site, an additional $13.8 billion will be added to increase the tuition tax credit.

The American Opportunity Tax Credit Act, which was included in the economic stimulus package, will allow students or their families, if the students are dependent, to write off $2,500 of educational expenses each year of their post-secondary education.

The new tax credit act is an update to the Hope Scholarship Tax Credit Program, which allowed for a $1,800 tax credit the first two years of post-secondary education. The new act will increase the amount of the tax break and the number of years parents or students can claim the tax credit.

The changes will mostly benefit middle-income to high-income families who are paying college out-of-pocket, Fair said.

According to the Department of Education’s Web site, families earning up to $180,000 annually are eligible for the new tax credit.

“The tax credit will potentially affect thousands of students in Oklahoma,” Fair said. “The eligibility requirements cover the vast majority of families in Oklahoma.”

The tax change will make no difference if people are not aware they are eligible, said Bruce Vandal, spokesman for Education Commission of the States, a nonprofit, nonpartisan organization.

Students or parents will be able to take advantage of the new tax credits with the 2009 income taxes.

Although the tax credits are only available for 2009 and 2010, President Barack Obama has proposed to make the changes permanent in his 2010 budget. But Vandal said the two-year grace period is a chance for states to figure out how they are going to finance higher education.

Obama has made it clear he plans on reducing the budget, so states must take advantage of the additional federal funding to figure out how they will further contribute to higher education, he said.

“The relationship between state funding and financial aid is going to be very interesting to watch,” Vandal said. “The hope is states will do the wise thing and use this two-year window to reorganize and think about how to fund post-secondary education.”