2009 Pell Grant Increase

The February 2009 economic stimulus bill included a Pell Grant increase, job training and retraining funding, and an expanded tax credit for higher education expenses. Highlights of the legislation are:

Education Benefit What’s New
Pell Grant Increase Maximum Pell Grant for the 2009-2010 school year is $5,350 (beginning July 1, 2009); for 2010-2011 school year the maximum grant is $5,550 (beginning July 1, 2010). Read more information about the 2010 Pell Grant including how to find out how much you qualify for. There’s also a Pell Grant program increase that will cover an additional 800,000 students. Total number of Pell Grant available by 2010: about 7 million.
Work-Study Increase Federal Work-Study program gets an additional $200 million, enough to pay for approximately 130,000 new work-study jobs averaging $1,500 per job per year.
College Savings Plan – New Eligible Expenses Purchasing a computer for college now qualifies as an expense for the tax-exempt 529 College Savings Plan.
Job Training/Retraining $4 billion for adult job training and dislocated worker job training, intended to help laid-off workers find new employment in similar or new industries. Funding includes money to help colleges offer career training programs (including community college courses), particularly in high-demand industries. Additional funding set aside for Trade Adjustment Assistance program benefits for at least 160,000 new workers who get laid off sometime in the next two years due to offshoring or increased foreign imports.
American Opportunity Tax Credit (effective January 2010) $2,500 tax credit for postsecondary education tuition, fees, and eligible related expenses. You get a dollar for dollar tax credit for the first $2,000 and 25 cents on the dollar for the next $2,000. Textbooks and course materials will be included in eligible related expenses. Single filers with an Adjusted Gross Income (AGI) up to $80,000 and joint filers with an AGI up to $160,000 can claim the full tax credit. (Single filers with an AGI between $80,000 and $90,000 and joint filers with an AGI between $160,000 and $180,000 may get a partial credit.) This credit is tax-refundable even for people who earn too little to pay taxes; low-income students and families will be able to claim up to 40% of the tax credit in the form of a tax refund. This new feature will allow approximately 4 million additional students to benefit from the program. Note: This credit does NOT apply to your 2008 taxes. It replaces the existing Hope tax credit next year, for the 2009 tax season.

Keep in mind that the Pell Grant increase has only a 2-year window: so far, it’s available only for 2009 and 2010. It may be that the increased Pell will be renewed after it “sunsets” (the 2-year time period expires), but if you’re thinking about going back to school, it would be smart to take advantage of the Pell Grant increase, job training, and education tax credit the 2009 stimulus bill has provided.

For more information read: What’s New: 2010 Pell Grant