President Obama’s Budget Plan Notices Pell, Student Loans, and Tax Credits


President Obama released his proposed $3.9 trillion budget for fiscal year 2015 on Tuesday. Although the budget plan serves chiefly to highlight the president’s priorities, the attention his plan gives to measures that will help improve college affordability should not be overlooked.  

For starters, the maximum Pell Grant would increase by $100, allowing students who demonstrate financial need to obtain up to $5,830. Additionally, the Washington Post  reports:

“Obama is seeking $7 billion over 10 years to reward colleges that enroll Pell Grant recipients and help them graduate on time. And the president wants $4 billion over 10 years for a fund to encourage states to fund colleges and universities based on outcomes such as on-time graduation rates.”

The increase to the Pell Grant would take effect in the 2015-16 academic year.

This is welcome news. Students need to be assured that their investment in higher education is a good one and that their dollars are not being wasted. Students shouldn’t have to pack on thousands of dollars — and, in many cases, tens of thousands of dollars — to get a bachelor’s degree. But at the very least, colleges should be held accountable for getting students across the finish line. Too often students take on high debt but don’t have a degree to show for it because institutions of higher education were not committed to their success.  

For college graduates who are already working to pay off their loans, the proposed budget would expand Pay As You Earn to all student borrowers. Pay As You Earn is a repayment program that caps borrowers’ monthly loan repayments based on a percentage of their income and forgives the remaining balance after 10 to 20 years of payments. Currently, it is only available to borrowers who took out loans after October 1, 2007, and who demonstrate financial need. By targeting more students, the new proposal will help to relieve those with older debt who are still struggling to pay back their loans.

And on the higher education tax credits front (if you don’t already care, you should care about higher education tax credits), Inside Higher Ed reports:

“The budget will ask Congress to make permanent the American Opportunity Tax Credit, which currently expires in December 2017. The administration says the credit will provide an average benefit of $1,110 to 11.5 million families. The benefit provides up to $2,500 in partially refundable tax credits for tuition.”

Making permanent the AOTC is a good thing because it provides financial consistency for families with students enrolled in college, and it allows them to be able to budget in future college expenses. Though, the White House focus this year should also be on improving higher education tax credits. Millions of dollars in tax credits are left on the table each year because students and families are often unaware they qualify for these credits or don’t know how to access them.

Obama’s budget proposal likely will not make much headway in Congress, seeing as a federal spending bill for fiscal year 2015 was already passed in January. Nonetheless, it’s worthy of our attention because it provides a glimpse into his values for the upcoming year. We would also like to see whether Congress’ values make college affordability a top priority.