New COVID-19 Relief Bill Benefits College Students

A third round of COVID-19 stimulus checks are in the mail. The two previous stimulus distributions excluded anyone 18 or older who could still be claimed as a dependent on another person’s tax return, making many college students ineligible.

But the new $1.9 trillion relief package President Joe Biden signed into law last week includes up to $1,400 for independent students (i.e., students who provide more than half their own financial support) or the parents or guardians of dependent Americans below certain income thresholds.

Source: CNBC

Qualified independent students will receive their stimulus checks directly. Dependent students are technically not eligible for their own stimulus checks. An eligible parent or guardian will receive up to $1,400 for each dependent, but dependents may have little or no say in how this money is used.

If you don’t fill out your own taxes each year, you are likely a dependent and will not directly receive a stimulus check. If you need help with tuition and other expenses, express your needs to your parent or guardian and ask how they intend to use their stimulus money.

Beyond stimulus checks, the American Rescue Plan includes several measures that directly impact college students, including child tax benefits and unemployment insurance. It also sends nearly $40 billion to colleges and universities, at least half of which must go to students as emergency financial aid, and paves the way for student debt cancellation.

Double the size of the largest government spending packages to date, the American Rescue Plan includes $170 billion for education, a quarter of which has been earmarked specifically for colleges and universities.

Targeted at schools with small endowments and high numbers of Pell Grant recipients, the $40 billion is intended to help colleges meet COVID-19 safety standards, reduce class sizes, invest in virtual and remedial education, and provide students with emergency grants.

It’s up to individual schools to decide which students will receive emergency financial aid. Some institutions may distribute the funds to Pell Grant recipients, whereas others may reach out to students to find out who is struggling due to the pandemic.

In any case, the search will likely start with college administrators leafing through FAFSA applications. Students hoping to see further financial aid from their schools should make sure to submit this year’s FAFSA.

Many college students stand to benefit from the larger stimulus checks ($1,400, up from $1,200), increased unemployment aid ($400 per week), higher child tax credits ($3,000 per child), and renters’ relief (the bill gives another $30 billion to renters and small landlords).

But the provision that could impact college students the most doesn’t even include a dollar sign. Adapted from the Student Loan Tax Relief Act introduced by Democratic Senators Elizabeth Warren and Bob Menendez, the new measure offers a tax break on student debt cancellations for the next five years, which could set Biden up to cancel student debt.

When student loans are forgiven under income-based repayment plans or through negotiated settlements, the write-off amount is generally considered income, which means it’s taxable. But an American Rescue Plan provision temporarily changes this. If the government forgives student loan debt between December 31, 2020, and January 1, 2026, it will be tax-free (at least on the federal level — states could potentially still tax student loan forgiveness).

Progressives have been lobbying Biden to forgive $50,000 of all federal student loan borrowers’ debt since before he entered office. Biden supports forgiving up to $10,000 but insists $50,000 is too much. He also wants any student debt forgiveness to pass through Congress, rather than enacting it through executive order.

However student debt may be accomplished, the new tax provision lays the groundwork for debt cancellation, without unintended expense to borrowers, sometime in the next four years.

Biden signed the massive $1.9 trillion relief package into law three days before the unemployment benefits put in place by the Trump administration were set to expire. Citing the swiftly approaching deadline, Democrats fast-tracked the American Rescue Plan using a budget reconciliation process, which requires only a simple majority.

After an all-night vote-a-rama (debate on reconciliation bills is limited to 20 hours), Vice President Kamala Harris arrived to cast her first tie-breaking vote, advancing the measure over unanimous Republican opposition. The bill then went on to pass in the House, again with zero Republican support. Just one state representative broke with their party: Democratic Representative Jared Golden, who voted against the bill.

While Biden hoped the ambitious COVID-19 relief package would garner at least some GOP support, Senate Republicans unanimously disapproved of it, with many warning of “the risks of too much ‘stimulus,'” including higher prices and higher interest rates.

Republicans also point to hundreds of billions of dollars in unspent funds, saying schools and other institutions should take advantage of money already approved in previous relief packages before the government issues more.

Congress passed a $2.2 trillion economic stimulus bill last March and a $900 billion relief bill in December. The former, known as the CARES Act, included $14 billion for U.S. colleges and universities, while the latter doled out an additional $20.5 billion in funding for higher education.

Many colleges — especially small, regional institutions — continue to cut faculty and programs due to lost income and increased expenses during the pandemic. College leaders have called the $35 billion currently available in relief funding “wholly inadequate.”

The new stimulus package will more than double that amount, bringing total relief funding for higher education to around $75 billion. The $40 billion allocation for higher education is the largest to date.

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