What the Media, Congress and the White House Are Not Explaining About the President’s School Loan Takeover…and about all tax brackets in general.
Where do I start? Well, first the President is taking over the variety of programs that offer school loans through private lenders, and is now folding them into the federal Direct Loan program instead – bye bye private lenders for middle class families. He’s also “expanding” the Pell grant program, by making it permanent (vs. discretionary spending based upon annual need), lowering the minimum income level qualifications but also lowering the maximum income level to cut out many middle class families.
Considering that only the middle of the road annual salary in metro areas of the US is about $77,000, when I saw the new maximum $75,000 annual income level limitations snuck into the President’s budget and the Stimulus bill, it stunned and amazed me. Personally, I live in a reasonably modest neighborhood, in a condo, not a house. After my mandatory expenses each month, like mortgage, car & home insurance, medications for a chronic illness, and necessary utilities, I barely have grocery money left over each month. How is it that I’m “high income”? I don’t believe in big government spending, I believe in private citizens taking care of fellow citizens. So, it’s not that I wouldn’t qualify for anything under the proposed budget that irks me – what bothers me is that our government can just assign arbitrary labels to people based on arbitrary (and unrealistic) income levels. And it really bothers me that my little brother and my parents will probably be saddled with a significantly larger college debt than they ever dreamed possible. Why? Because our President and Congress says they’re “wealthy”.
Among the many issues in his budget, President Obama’s plan will do away with the Family Federal Education Loan (FFEL) Program and instead originate loans from the government’s Direct Loan Program. The FFEL Program uses private sector capital extended by banks, savings and loan associations, and credit unions to help students and parents pay for education past high school. The federal guarantee for FFEL Program loans has historically been provided through nonprofits and state agencies.
Essentially, the President is removing loan subsidy funds for private institutions and organizations and moving the control and source of all funding to the government. In addition, the plan creates several new government loan programs and redefines other existing government programs.
Of particular importance is the redefinition of what constitutes the “high income” bracket, not just for student loan financial eligibility as noted in Part A below, but where tax credits are concerned in Part B as well. If you make an annual gross adjusted income of $75,000 or more/$110,000 for married filing jointly, you will now be ineligible for any of these educational programs and tax cuts.
Below are details regarding changes in the mandatory Education funding, taken from page 12 of the budget summary tables of the President’s budget:
Part A: Educational Grants & Loans
- Eliminate entitlements for financial intermediaries under the Family Federal Education Loan Program
Eliminate $24.3 billion in private subsidies over next five years for Stafford Loans, PLUS Loans, Perkins Loans and Consolidation Loans. Phase out private lending program and transition to the federal Direct Loan program under new guidelines. “High income” applicants (as identified above) would be ineligible.
- Modernize Perkins loans
Reduce funds by $3.2 billion over next five years; reduce minimum income floor to focus more on students from significantly disadvantaged backgrounds. “High income” applicants would be ineligible.
- Make Pell Grant Funding Mandatory & and index maximum awards spending
Transform the Pell Grant Program into an entitlement program, rather than its current discretionary spending. Increase funding $116.8 billion over next 10 years. Increase maximum award to $5,550 by eliminating private bank subsides. “High income” applicants would be ineligible.
- Create a new College Access and Completion Fund
Provide $2.1 billion in funds over five years (2010-2014) to give grants to states and other entities to pay for programs designed to increase students’ success in college, with a particular focus on students from low-income and other disadvantaged backgrounds. “High income” applicants would be ineligible.
Part B: Tax Credits
A number of tax credits will also greatly effect those in this “wealthy” income bracket. See the budget line items below:
- Provide “American Opportunity Tax Credit”
Make permanent the $2,500 tax credit for families’ college spending enacted as part of the economic stimulus package. Replacing the current “Hope tax credit”, the “American Opportunity Tax Credit,” is partially refundable, making it available to people from very low-income families that do not pay sufficient taxes to qualify for existing college tax breaks. Amazingly though, it could also give the Treasury secretary the authority to require students to perform community service in order to receive the credit! Those with adjustable gross income of $75,000 per individual/$150,000 married filing jointly are ineligible.
- Provide “Making Work Pay” tax credit
Provide a refundable credit on wages of up to $400 for individuals and $800 for married couples. As this will spread across paychecks, it amounts to an average of approximately $10 per paycheck. Those with adjustable gross income of $75,000 per individual/$150,000 married filing jointly are ineligible.
- Expand “Earned Income Tax Credit”
The EITC is a refundable credit for low-income working families and individuals; the amount of credit is based upon the number of child dependents and annual income, and phases out by $1,880 to a maximum income of $21,420.
- Expand refundability of the “Child Tax Credit”
Provides $1,000 for every qualifying child claimed on a taxpayer’s return. Prior to H.R. 1, a family needed to earn above $8,500 per year to qualify for the refundable portion of the Child Tax Credit, but now that family will receive a refundable benefit at only $3,000 of earnings. The credit phases out for those with income over $75,000/$110,000 for married couples.
- Expand saver’s credit and automatic enrollment in IRAs and 401(k)s
Requires employers that don’t provide a retirement plan to enroll their employees in a direct-deposit IRA account through the government. Expand the existing saver’s credit program to provide a 50% match on the first $1,000 of retirement savings made by families that earn income of less than $65,000 a year.
- Eliminate Advanced Earned Income Tax Credit
This credit allows eligible families to receive a portion of their Earned Income Tax Credit (EITC) throughout the year through a reduction in tax withholding, so they don’t have to wait until they file their tax returns to get the extra cash. It typically increases a family’s take-home pay by up to $35 a week. Due to increases in scams, and the low program participation rate (less than 3%), this program will be eliminated and other programs for low-income families expanded instead.
- Continue remaining expiring provisions through calendar year 2010
Please people. Wake up. Our government is giving itself increasingly greater powers, including the power to function as a national banking lender, and the power to arbitrarily set social classes.
And what as far as my conerns about income levels? It’s creative semantics when you hear “tax cuts for 95% of the American people, and increases for only the very wealthiest of America”. It’s a blatant distortion of the truth. I don’t know whether to be flattered or pissed that I seem to apparently now be among the ranks of the very wealthiest in America. Most of all, I’M SCARED, because the latest trend seems to be for Americans to despise and hate anyone with any level of success, even if you’re not a banker or stock broker making six or seven figures. Now we’re discriminating against the five figure earners. Once they start providing “free healthcare” to all, then what the hell incentive will there be for any of us to even work? We’ll be demonized just for being motivated individuals by that time.