College tuition help on the horizon

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NEW YORK (CNNMoney.com) -- There could be help on the horizon for families worried about paying for college tuition if Congress passes the American Recovery and Reinvestment Act of 2009. Here is what this bill may do for college students.

1. Tax credits

The Hope Scholarship tax credit would be temporarily increased.

Just to clarify, a tax credit lowers your tax bill dollar for dollar while a deduction shaves money off your taxable income. This bill could raise the amount of tax credits from $1,800 to $2,500. And you can use these credits not only toward tuition, but also for course materials - like textbooks. Income phase outs are also higher, so more people will qualify.

To qualify for a HOPE scholarship, students must be in the first or second year of college.

2. Pell Grant increase

The Pell Grant is a need-based grant that goes to low-income undergraduate students. 98% of Pell Grants go to students whose family income is under $50,000 according to Mark Kantrowitz of Finaid.org.

This bill would increase the amount a student would qualify for by up to $500. In total, the student would be eligible for a maximum grant of $5,350. It's estimated this will help 800,000 additional students. Overall, an estimated 7 million students will receive Pell Grants in 2009-2010.

3. Stafford loan limits increase

This bill would increase unsubsidized Stafford loan limits. The unsubsidized Stafford is not a needs-based loan.

For dependent freshmen, the new limit is $7,500. For sophomores it's $8,500 and for juniors and seniors, it's now $9,500. These changes would be effective for loans on or after January 2009.

The limit increase is good news for students who now may not have to rely on the private student loan market to supplement their loans. Federal loans are a lot cheaper than private options.

4. Get the timeline

These student aid provisions are part of the American Recovery and Reinvestment Act of 2009 proposed by President Obama. Experts say that it's likely there will be pressure on Congress to act on this sooner rather than later. And considering Congress is still in its "honeymoon" phase, it could be passed within a few weeks. Of course, we will continue to bring you the latest.

Have you found a way to pay for your child's college education without taking on too much debt? Did you choose a university based on its lower cost or loan programs, research scholarships, or just save up and pay in full? We want to hear from you. Send your stories to pwang@moneymail.com and you could be featured in an upcoming story.