The Obama budget proposal also aims to eliminate in 2010 the Federal Family Education Loan Program (FFELP), which effectively served as the middleman between government education funds for college students, and the students who receive them.
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Obama Budget Proposal to Increase College Pell Grants and Eliminate FFELP Middleman

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Continuing his commitment to make education a top national priority, President Obama's budget includes a proposed, revised Pell Grant program that would make the popular college Pell Grants a mandatory government spending program, automatically set to increase along with the Consumer Price Index plus 1 percent.

The Obama budget proposal also aims to eliminate in 2010 the Federal Family Education Loan Program (FFELP), which effectively served as the middleman between government education funds for college students, and the students who receive them.

The hope is that President Obama's vision for improved educational support - direct student loans, managed by the Education Department and thus eliminating subsidized middlemen -  can be a far better deal for American taxpayers while providing much needed support to college students. Estimates show that originating all new loans in the Direct Loan Program would save taxpayers $24.3 billion over five years and $47.5 over ten years.

WHAT DOES THIS MEAN FOR YOU IN THE MILITARY?

As military service members, you have many options for financial aid towards your college degree as well as other educational trainings and certificates. From the Montgomery GI Bill with Top-Up and Kicker supplements, to the new and improved Post 9/11 GI Bill scheduled to go into effect August 2009, and so much more.

But you and your military dependents can also qualify for government loans and grants such as the popular Pell Grant and the Federal Perkins Loan. When looking to fund your college education and that of your military children, supplementing your GI Bill benefits and other military education bonuses with the new and improved federal government grants and loans as currently proposed by President Obama, should not be overlooked.

HOPEFUL NEWS FOR THE COLLEGE BOUND

President Obama's Pell Grant proposal gave college students good reason to be hopeful. In previous years, the Pell Grant award has remained relatively flat while the cost of getting a college education has dramatically increased. President Obama's proposal to tie the Pell Grant award to the CPI plus 1 percent is designed to support those struggling to pay for college in an economy where inflation is a reality.

The Obama proposal, not surprisingly, gave pause to the FFELP, and reignited the FFELP vs. Direct Loan debate. Some detractors worry that students and parents will lose out on FFELP services like college access programs, financial literacy education and loan delinquency and default prevention. But overall, Obama's budget proposal aimed to provide significant increases in student aid as well as easier access to government-based educational grants and loans.

OBAMA'S PROPOSED NEW FEDERAL PELL GRANTS

The Obama budget proposal supports a $5,550 Pell Grant maximum award in the 2010-2011 school year. The Administration will align Pell grants increases with the Consumer Price Index plus 1 percent, to consider inflation. If approved by Congress, the new base appropriatio for the Pell grant would be established firmly at $5,550.

In addition, the Obama Administration proposes to make the Pell Grant program mandatory in order to provide a regular stream of funding, and to eliminate the "backfilling" of billions of dollars in Pell Grant shortfalls each year. It also eliminates the "cliff effect," which would have served to decrease the amount of the Pell grant, when support levels mandated by the College Cost Reduction and Access Act (CCRAA) and the Stimulus Package (H.R. 1) are phased out.

WHY ELIMINATING FFELP COULD MEAN MORE COLLEGE BENEFITS

The Obama budget recommends the elimination of the FFELP, calling for the origination of all new loans through the Direct Loan program. An initial estimate of this strategy shows a savings of more than $4 billion a year, which would be reinvested in aid to students. Collections and servicing student government loans would be outsourced to multiple private sector contractors.

FEDERAL PERKINS LOANS WOULD ALSO SEE IMPROVEMENTS

The budget also makes campus-based, low-interest loans more widely available through a new and updated Perkins Loan program. The revolving fund to support this modernized version of the Perkins Loan would no longer be campus-based, but instead, would operate at the federal level.

AT-RISK STUDENTS CAN COMPLETE COLLEGE

The Obama budget includes a new, five-year, $2.5 billion Access and Completion Incentive Fund to support federal/state partnerships that help low-income students complete their college educations.

MAKING THE AMERICAN OPPORTUNITY TAX CREDIT PERMANENT

The Obama budget proposes to make the $2,500 American Opportunity Tax Credit, as created in the American Recovery and Reinvestment Act of 2009, permanent.

It's not yet certain if the Obama administration's budget proposal will be supported, but it seems clear that President Obama is committed to supporting higher education at the national level. As for the final outcome? The 2010 budget will be settled as Congress takes up the FY 2010 budget process in the coming months.



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