By Kenna Beamer
On March 11th, 2021 President Joe Biden signed the new $1.9 trillion American Rescue Plan Act of 2021 (ARP). Not only does it allow adult dependents to be eligible for a full stimulus credit, it also includes lots of institution-based funding designated to help students. I interviewed Dave Swenson, a research scientist in the Economics department at Iowa State. Swenson has studied community and regional economics for over 30 years and provided an in-depth explanation of how the stimulus checks in the ARP will affect adult dependents here in Iowa State.
Section 6428B is the legislation that provides stimulus checks to qualified citizens. Those who qualify for a stimulus check must have filed independently on their 2020 taxes to receive the payment. However, the ARP differs from the previous rescue plans because adult dependents are now counted the same way child dependents are. This means each dependant filed brings in $1,400 for the filer, up to $4,000 for single-filers, and $8,000 for joint-filers. This allows an independent filer responsible for adult dependents, up to age 24, to get a larger sum of money. This means a dependent will only receive a stimulus check payment if they filed their taxes independently. If the dependent had their taxes done by their parent(s)/Guardian(s) then they will receive the payment instead.
Swenson also notes that payments “phases out as your income goes up.” For example, families making a combined income of over $150,000 will not receive stimulus payments. However, Swenson claims that’s not necessarily a concern because “most families don’t have combined incomes of $150,000…the vast majority of families will get the full amount.” I confirmed this with the Iowa Data Center, which reported in 2019 that the median family income in Iowa was $78,152. However, if the independent filer was a single-filer, the income-cap is $80,000; which according to Swenson, shouldn’t hinder too many Iowans as the median income per capita here is just over $33,000 according to the Iowa Data Center’s 2019 reports.
Iowa State will also be directly impacted by the Higher Education Relief Fund, which is section 2003 of the ARP. According to Swenson just over $39.5 billion is being allocated to higher education institutions, which includes community colleges, public universities, non-profit universities, and “only 1% to go to for-profit colleges.” Of the money each school receives, half goes to the institution directly and is required to be divided among University programs. For Iowa State, the majority of funds would go towards Cyclones Care, among several other programs. The second half of funding each school receives must go directly to financially-distressed students in the form of aid. Swenson said the majority of recipients of these extra funds will be Title IV students, or students who receive federally insured student loans. Directly put, “if you qualify for federally funded student assistance, you would qualify then for assistance.”
While it’s next to impossible to know at this point how much Iowa State, or any college, is specifically receiving from the Higher Education Relief Fund, Swenson said the amount is dependent on each school’s Pell Grant usage. “The fraction of your students who qualify for Pell Grants is the primary allocation factor.” Swenson expects Iowa State to receive comparatively high funding compared to other schools, such as Harvard because of how many students at Iowa State qualify for those grants.
We then moved on to the big question, how will this all impact the future? Specifically, Swenson brought up student loan forgiveness. Section 9675 of the ARP, alters previous rescue plans to make student loan forgiveness non-taxable until 2025. Swenson explained that before now, any forgiven loans were considered income and were taxed as income. He then clarified that this doesn’t have much impact yet because no formal legislation has been passed to actually forgive student loans, but if a forgiveness bill passes before 2025, the forgiven debt will not be taxed.
Swenson also reiterated that this is temporary disaster relief, “by next fall, it’s going to be close to normal; therefore we’re probably going to need less disaster relief.” In fact, the majority of this legislation will expire on Labor Day of this year. However, he also mentioned President Biden’s proposals to forgive student debt up to $10,000 even after the pandemic. As for Covid relief, though, Swenson estimates that unemployed worker assistance programs and other minor areas of assistance could continue past Labor Day, but does not think funding for schools, nor other major sectors, will continue past that point.
One final thing Swenson mentioned, as someone who has built a decades-long career studying economics, is that over $6 trillion has been circulated back into the economy by the government through these Covid relief acts, and worry about the debt incurred because of the pandemic isn’t necessary. Swenson said the only reason anyone should worry is if the interest payments on the debt grow faster than our economy, which they do not.
In summary, the American Rescue Plan of 2021 does a lot of good for college students. Check with your parents or guardians to see if they’ve gotten their stimulus payments or if you filed independently, be sure to keep an eye out for the payment in your bank account these next few weeks. Also, remember to apply for FAFSA for the 2021-22 school year (the deadline is June 30th) to have a chance of reaping the benefits of the Higher Education Relief Fund.