Pell Grant Program

The Pell Grant program provides grants to low-income undergraduates to help them pay for college. In 2002-03, this program provided $11.6 billion in grants to 4.8 million undergraduate students at 5,900 postsecondary education institutions. Individual grants ranged from $400 to $4,000; the average grant was $2,411. The average family income of Pell Grant recipients who were dependent on their parents for financial support in 2000-01 was $21,5990. The average income for financially independent students was $13,658.

Supplemental Educational Opportunity Grant (SEOG) Program

The SEOG program provides grants to low-income students, and generally helps supplement the aid they receive from Pell Grants and other sources. Federal funds provide for 75 percent of the award; the college or university contributes the remaining 25 percent or more. In 2001-02, the program provided $691 million in federal funds to approximately 1.2 million students at approximately 3,800 postsecondary institutions. In 2001-02, awards ranged from $100 to $4,000; the average grant was $581.

Leveraging Educational Assistance Partnership (LEAP) Program

This program, which provides incentives for states to provide grants to students who attend college, has played a significant role in encouraging every state to create and maintain its own student grant program. States are required to provide at least 50 percent of the funding for this program. In 2001-02, federal LEAP funds provided $50 million in grants to students who attended postsecondary education. Including state matching funds, approximately 2 mollion students receive LEAP funds in 2000-01.

Federal Family Education Loan (FFEL) Program

The FFEL program makes loans available to students and their families through some 7,100 participating private lenders. The federal guarantee protects FFEL lenders against loss from borrower default. In 2001-02, the program made 6.3 million loans for a total amount borrowed of over $29 billion.

William D. Ford Direct Student Loan Program

The Direct Student Loan program uses federal Treasury funds to provide loan capital directly to schools, which then disburse loan funds to students. The program began operation in 1994-95 with approximately 7 percent of total U.S. student loan volume. In 2001-02, it made 3 million loans for a total of over $11 billion.

Both FFEL and Direct Loans feature three types of loans.



Perkins Loan Program

This program provides low-interest (5 percent) loans to undergraduate and graduate/professional students who demonstrate financial need. Loans are provided through a fund consisting of new federal capital contributions (FCC), institutional contributions, and loan repayments from prior borrowers. The FCC is matched 25 percent by colleges and universities. Undergraduates are eligible to borrow up to $3,000 per year, for a maximum of $15,000. Graduate students are eligible to borrow up to $5,000 per year, for a cumulative maximum (including undergraduate Perkins Loans) of $30,000. In 2001-02, the program made loans to about 695,000 students at approximately 2,700 institutions. Over half of the loan funds go to students with family income of $30,000 or less.

Federal Work-Study (FWS) Program

This program provides part-time jobs to undergraduates and graduate/professional students who use the earnings to finance their educational programs. Federal funds cover up to 75 percent of wages, with the remaining 25 percent or more being paid by colleges and universities or businesses. In 1997-98, this program provided $1.2 billion in federal work-study funds to approximately 990,000 students attending 3,900 postsecondary institutions. In 2001-02, average student earnings from the program were $1,230. Half of the recipients came from families with income less than $30,000.

TRIO Programs

These programs are designed to help low-income Americans enter and complete college. TRIO provides services to over 750,000 low-income students, including assistance in choosing a college; tutoring; personal and financial counseling; career counseling; and workplace visits. Two-thirds of the students served must come from families in which neither parent is a college graduate and total income is less than $24,000.

Specialized Federal Programs

Federal aid is also available from a variety of agencies outside the Department of Education. This aid, including fellowships, internships, grants, and loans, can be need-based or merit-based, depending on the program. These programs include: Graduate Assistance in Areas of National Need, National Science Foundation predoctoral fellowships (minority and general graduates), the Robert C. Byrd Honors Scholarship program, and college grants provided to volunteers in the Americorps national service programs. These programs provided more than $2.7 billion to students in 2001-02.

Hope Scholarship Tax Credit

The Hope Scholarship tax credit allows students, or their parents or guardians, to claim up to $1,500 per student per year for out-of-pocket tuition and fee expenditures. This $1,500 tax credit may be claimed for the first two years of undergraduate study. The Hope credit is available to taxpayers with a gross income of up to $50,000 (up to $100,000 for joint filers). The credit is phased out on a sliding scale for taxpayers earning $40,000 and above (and $80,000 and above for joint filers).

Lifetime Learning Tax Credit

The Lifetime Learning tax credit allows college students or their families to claim up to 20 percent of qualified out-of-pocket tuition expenditures per year. The Lifetime Learning credit, which may be claimed for an unlimited number of years for both undergraduate and graduate study, allows qualified taxpayers to claim a tax credit equal to 20 percent of the first $10,000 spent on tuition and fees. The Lifetime Learning credit is available to taxpayers with a gross income of up to $50,000 (and up to $100,000 for joint filers). The credit is phased out on a sliding scale for taxpayers earning $40,000 and above (and $80,000 and above for joint filers).

Coverdell Education Savings Account

Coverdell ESA's are savings accounts to finance the education expenses of a child or other designated beneficiary. Contributions are limited to $2000 per year and are not tax deductible. However, funds deposited into the account grow tax free until withdrawn to pay college tuition. Eligibility to make contributions to Coverdell Education Savings Accounts is phased out for contributors with modified adjusted gross income between $95,000 and $110,000 for single taxpayers ($200,000 and $220,000 for joint filers).

Deduction for Student Loan Interest

The deduction for student loan interest allows borrowers to deduct interest paid on any loan used for college expenses. This deduction is available to all taxpayers, regardless of whether they take the standard deduction or itemize their deductions. The maximum deduction is $2,500 in 1998; $1,500 in 1999; $2,000 in 2000; and $2,500 in 2001 and thereafter. The deduction is phased out for single taxpayers with modified adjusted gross income of between $50,000 and $65,000 ($100,000 and $130,000 for joint returns).

Deduction for Tution and Fees Expenses

Beginning in 2002, up to $30,000 of qualified tuition expenses may be deducted from your taxable income. This deduction is available to all taxpayers, regardless of whether they take the standard deduction or itemize. There are no income phase outs, therefore this deduction may be beneficial to taxpayers who cannot take either of the education credits because their income is too high.



Exclusion for Employee Education Benefits (Section 127)

This provision allows workers to exclude from taxable income up to $5,250 a year in undergraduate tuition assistance provided by their employers.