Federal Student Aid and 2012 Congressional Elections – Applying for Financial Aid

According the National Association of Student Financial Aid Administrators (NASFAA), “The winners of the 2012 election (in the White House and in Congress) will have to tackle several outstanding student aid issues when they take office in January 2013, including a PELL Grant funding shortfall, student loan interest rates, and expiring tax benefits. While President Barack Obama’s and Mitt Romney’s student aid policies have been closely compared, the incoming 113th Congress will be drafting and passing the bills that impact student aid over the next two years.” Here are some of the major issues the 113th Congress will have to deal with when they begin their session in January 2013.

Student Loan Interest Rates

While Congress passed a one-year extension of the 3.4 percent interest rate for Direct Subsidized Stafford Loans preventing the rate from increasing to 6.8 percent, it will need to address this issue again before July 1, 2013 to prevent the interest rate on these loans from increasing.

Pell Grant Shortfall

The recent Federal Pell Grant Program expansion has driven up costs and will force Congress to deal with finding resources for funding. An option would be to change eligibility restrictions to avoid a funding shortfall for the program but will reduce the number of recipients who receive the grant.

Education Tax Benefits

Four education tax benefits will expire on Dec. 31, 2012 — the American Opportunity Tax Credit, the Student Loan Interest Deduction, the Coverdell Education Savings Accounts, and the Employer-Provided Educational Assistance. While income tax filers for 2012 will be able to claim these tax credit benefits 2013, they will not be available for the 2013 tax year unless Congress takes action by Dec. 31, 2013.

HEA Reauthorization

The renewal of the Higher Education Act is also due in 2014. Last time Reauthorization was attempted by the United States Congress took approximately a decade. While the hope is to get this action done in a shorter time frame, the problem is that there are several other education bills that are due to be reauthorized that have yet to be completed, including the Elementary and Secondary Education Act (ESEA).