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News Clips 11/21/2012
Add Federal Student Aid to Potential Cuts
Source: The Wall Street Journal, 11/18/12
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By AnnaMaria Andriotis
Automatic spending cuts that are set to kick in at year-end—as part of the so-called fiscal cliff—could result in an 8% cut in federal student aid.
And college experts caution that even more cuts could kick in starting next fall. The Higher Education Act, a major piece of legislation that for decades has helped determine how much college aid—including grants and loans—the federal government provides, is up for reauthorization.
But no matter what happens to financial aid, it won't keep up with the rate at which tuition is rising, says Mark Kantrowitz, publisher of FinAid.org. Here are three types of financial aid that could see changes in 2013.
Pell grants. The Consolidated Appropriations Act that was signed into law last December, which set most federal agencies' budgets for 2012 (and was later extended to March 2013), scaled back spending for this grant program. Those cuts could be made permanent (or longer-lasting) when the law is reauthorized, says Mr. Kantrowitz.
Federal student loans. In late June, Congress voted to extend the 3.4% fixed rate on the subsidized Stafford loan for one more year, through June 2013. Families shouldn't bet on another extension this summer.
College tax credits. Provisions for the American Opportunity Tax Credit, which allows families to get a tax credit of up to $2,500 a year for up to four years, are scheduled to expire at the end of the year. Unless Congress acts, that will be scaled back to a maximum of $1,900 a year for two years.