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College students get big boost in aid for College Grants
Stimulus bill, fed budget offer larger grants, more loan options

Marisa Schultz / The Detroit News
Michigan college students are in line to benefit this year from the largest increase ever in federal student aid spending, under measures rolled out in the early days of the Obama administration.
Between the president's budget proposal, and last month’s economic stimulus act, students and their families are poised to have greater access to grant programs, more options for low-interest federal loans and tax credits geared toward reducing the debt burden and, ultimately, the impact of rising tuition costs.
"This is landmark legislation for students, families, colleges and universities," Terry Hartle, senior vice president at the American Council on Education, said of the stimulus funds. "It provides the biggest increase in student aid spending in the nation's history."
The relief will be especially welcome in Michigan, where the average public university tuition approaches $9,000, making it one of the most expensive states in the nation in which to earn a college degree. With annual tuition hikes -- averaging 7 percent last year -- the gulf between federal financial aid and the cost of an education has widened significantly over the past decade.
While the Obama measures would increase direct aid to students, it's too early to tell whether the state will allocate the stimulus money in a way that will allow Michigan universities to freeze tuition this year.
University leaders, however, say the investment in education presents many opportunities.
"It has the potential to be a great boost for Michigan families and universities," said Michael Boulus, executive director of the Presidents Council, State Universities of Michigan.
Among the key provisions of the stimulus funds and Obama's budget proposal:
• Grants: The stimulus act increases the maximum Pell Grant -- federal gift aid for the neediest students -- from $4,731 to $5,350 this year and $5,550 by 2010. The move is expected to increase the number of recipients by 800,000 for a total of 7 million students.
Students would receive $500 more on average, said Mark Kantrowitz, publisher of Finaid.org. The boost will increase access and lessen the need for student loans.
Getting more Pell Grant money and taking out fewer loans is good news to Eastern Michigan University student Chris Rolston, 18.
"I would feel relieved," said Rolston, who pays for school between loans, his federal work study and about $900 in Pell Grants. He worries whether he can repay the money he borrowed. "It's just hard to pay back with the economy. The only job I have is through the school, and it's hard to find more jobs around here."
The president's budget aims to stabilize Pell Grant funding by increasing the award by the rate of inflation plus 1 percentage point annually, ensuring the grant keeps pace with tuition prices.
"The more we can minimize borrowing, the better off they will be when they graduate," said Val Meyers, associate director of the Office of Financial Aid at Michigan State University , where about 6,500 students received Pell Grants in the 2006-07 school year.
• Student loans: The federal Perkins loan program would undergo a massive expansion that would allow all colleges and universities to participate in this low-interest loan program. The number of participating schools would grow from 1,800 to 4,400, giving 2.7 million new low-income students access to the loans. The loan volume would go from $1 billion to $6 billion, a move that may lessen the need for private, costlier student loans.
The 5 percent interest rate would stay the same, but interest would accrue while students are in school, under Obama's budget proposal.
The Obama budget proposal would effectively eliminate banks as lenders of federal money and instead insist students borrow directly from the federal government. Michigan's 15 public universities use the direct student loan program, but most community and private colleges still use the bank-based program and would have to convert under the Obama budget proposal.
The bank-as-lender program was already on "life support" since many banks have dropped out of the student loan business amid financial turmoil, and taking away their subsidies could save $4 billion a year, according to Education Secretary Arne Duncan.
• Tax credits: Families making up to $180,000 will see nearly $14 billion for tuition tax credits, raising the credit from $1,800 to $2,500 for money spent on tuition, fees and now textbooks, under the stimulus act. For the first time, families that don't owe taxes can get up to a $1,000 rebate. The budget proposes to make this tax credit permanent.
• Work study: The stimulus act increases work-study funds by $200 million, which would enable 81,000 more students to qualify for campus job programs, Kantrowitz said.
• Job retraining: Michigan will receive about $193 million for worker retraining programs, said Mike Hansen, president of the Michigan Community College Association, which represents all 28 public colleges in Michigan.
This stimulus money, state leaders say, means more people can access the state's No Worker Left Behind program that pays for tuition of displaced workers seeking training in emerging careers. With the high unemployment rate, that program has developed wait lists, and the demand is huge for more funding, Hansen said.
The bottom line is that "community colleges, as one of the leading training providers, will be the beneficiary of much of that money," Hansen said.
• College completion: Obama's budget proposal calls for a $500 million grant program for federal-state-local partnerships to improve retention and graduation rates, particularly for low-income students. Details were not clear on how money would be divvied up, but funds would support research into what works to help increase the college completion rate, according to the administration.


College students get big boost in aid for College Grants