CQ TODAY ONLINE NEWS – EDUCATION
Jan. 27, 2012 – 10:51 a.m.
Obama Shares Details of Higher Education Funding Plan
By Lauren Smith, CQ Staff
President Obama on Friday morning explained in more detail how his new college affordability proposal would shift federal funding away from colleges and universities that fail to keep tuition costs from rising.
Speaking at the University of Michigan in Ann Arbor, Obama emphasized the importance of a college degree. “In this economy, there is no greater predictor of success than a good education,” he said. “College is the single most important investment you can make in your future.”
But he underscored that rising tuition is a severe barrier and that colleges and universities should be held accountable. “You can’t assume that you’ll just jack up tuition every single year,” he said. “If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.”
Obama’s proposal, unveiled in his State of the Union address on Jan. 24, would shift federal dollars for campus-based aid programs away from colleges that fail to keep net tuition down and toward those that are affordable, provide good value and serve a relatively higher number of low-income students.
The campus aid programs — Supplemental Educational Opportunity Grants, Perkins loans and work-study opportunities — are distributed under a formula that rewards colleges for longevity in the program. The administration called it an “antiquated” system that provides no incentive to keep tuition costs low.
“Students will receive the greatest government grant and loan support at colleges where they are likely to be best served, and little or no campus aid will flow to colleges that fail to meet affordability and value standards,” according to a White House blueprint released Friday morning.
Obama also proposed increasing the aid to $10 billion annually, with most of the boost going toward an expansion of Perkins loans. The administration said the expansion would come at no additional taxpayer cost.
Looking for Competition
The White House has proven to be a fan of competitive grant initiatives, and the president’s proposal taps into that strategy to offer colleges and universities some carrots to promote affordability and quality.
This would be achieved chiefly through Obama’s proposed expansion of his Race to the Top education initiative, a competitive grant program that rewards states for making changes in elementary and secondary education. A version for higher education would establish a $1 billion competitive grant to incentivize governors and state legislators to keep tuition affordable and improve student outcomes, according to the administration.
States would be rewarded for revamping their financing structures for higher education; coordinating with high schools to better prepare students for college, with the ultimate goal of improving college graduation times; and maintaining “adequate levels” of funding for higher education.
“If you can find new ways to bring down the cost of college and make it easier for more students to graduate, we will help you do it,” Obama said. “We will give you addition federal support to make sure [students] aren’t loaded up with debt when [they] graduate from college.”
The president also proposed creating a $55 million competitive grant program for colleges and nonprofit organizations that develop plans to boost higher education attainment and student outcomes. The program would offer startup funds to the institutions, which include private schools, for their projects, such as using technology to redesign courses or providing early college preparation activities to lessen the need for remediation.
Obama Shares Details of Higher Education Funding Plan
Tuition costs have outpaced inflation for decades, according to College Board data. In the past year, for example, in-state tuition and fees at public four-year institutions increased 8.3 percent, while inflation was more than 3 percent. The federal government now provides half of all undergraduate grant aid, compared with about a third a decade ago, and student loan debt eclipsed credit card debt last year.
Both Congress and Obama have ramped up efforts to persuade colleges to control costs. Since 2008, the administration has overhauled the student aid system and expanded grant aid and college tax credits. Meanwhile, Congress has approved spending to maintain the maximum award offered by the Pell grant, which provides tuition assistance to low- to middle-income students.
On Friday, Obama repeated the plea he made to Congress during the State of the Union to prevent the forthcoming jump in federal loan interest rates, make a tuition tax credit permanent and double the number of work-study jobs.
Interest rates for federal education loans are set to jump from 3.4 percent to 6.8 percent for 7.4 million borrowers beginning in July, while the American Opportunity Tax Credit is set to expire this year. More than 9 million students per year take advantage of the credit, which provides up to $10,000 for four years of college.
To help inform students and families of their education options, Obama called for the development of scorecards for all degree-granting institutions that would provide information on costs, graduation rates and potential earnings.
“We want to push more information out so that consumers can make good choices,” Obama said. “The bottom line is in the economy built to last, we need to keep doing everything we can to bring down the cost of college.”