A federal balanced-budget plan announced Friday would benefit college students by increasing Pell Grants, tax credits and family deductions for college costs.
The plan, announced by President Clinton and Republican leaders would balance the yearly federal deficit for the first time since 1969 in 2002. It would also cut the growth of spending in areas of the budget, such as Medicare, while increasing funding for college students.
The maximum Pell Grant award would be raised from $2,700 per student to $3,000 under the plan. About 4 million students receive Pell Grants annually. And about 10,000 University students in the school’s four-college system receive Pell Grants, said Peter Zetterberg, the University’s director of planning and analysis. The average award per student is about $1,600.
Clinton, who made the announcement at a Democratic retreat in Maryland, said increasing funding for higher education was a top priority.
“This budget meets my goal of making education America’s No. 1 priority on the edge of the 21st century,” Clinton said. “It’ll have the largest increase in Pell Grant scholarships in 20 years.”
Under current law, Pell Grant recipients must be under the age of 24 to receive the grant. The plan would allow older students to receive the grants.
The other part of the balanced-budget plan that would help college students is Clinton’s Hope Scholarships. This plan calls for $35 billion in college tuition tax credits.
Recipients of a Hope Scholarship would receive a tax credit of up to $1,500 for the first year of college, and another $1,500 for the second year if the student maintains a B average. Clinton said the plan would allow many Americans who previously could not afford school to attend college.
The budget plan, if passed by Congress later this session, would also include a deduction of up to $10,000 for college costs from a family’s income. The deduction is smaller for families with higher incomes. The program is capped at families that earn $100,000.
Families can choose between the Hope Scholarship tax credit or the tax deduction, but cannot choose both options.
The federal government already spends $35 billion annually for higher education. The balanced-budget plan calls for a $70 billion increase for all education funding, to be split between the Pell Grants and for an expansion in the Head Start program for pre-schoolers.
“It will help us to make sure that every 8-year-old will be able to read, every 12-year-old can log onto the Internet, every 18-year-old can go into college,” Clinton said.
University President Nils Hasselmo said he is pleased with the agreement.
“I think it is generally very supportive of students,” Hasselmo said.
Sen. Paul Wellstone had authored a plan earlier this session to increase the maximum Pell Grant award to $5,000. He serves on the Senate Committee on Labor and Human Resources, which determines the federal Pell Grant funding levels.
Wellstone’s plan has not been passed by either house of Congress and will likely be killed now that the President’s plan has received bipartisan support.
The balanced-budget plan comes on the heels of news from the Congressional Budget Office on Thursday that the country’s growing economy will lead to an additional $225 billion in revenue growth over five years, the office estimates.
To balance the budget, both parties agreed to slow the growth rate of the Medicare program. The slowed growth rate will cut an estimated $115 billion in projected costs over the next five years.
The budget plan features several initiatives sought by Republicans, such as $135 billion in tax cuts within five years, including a cut in the capital gains tax rate and a $500-per-child tax credit. The specific tax cuts will be determined in the tax committees.