Obama to Colleges: Control Costs or Lose Funding
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The Fiscal Times
January 27, 2012


Amid skyrocketing college tuition and historic levels of student debt, President Obama on Friday unveiled a proposal that would pressure colleges and universities to make higher education more affordable and efficient and relieve graduates struggling to repay their college loans.

Obama described his plan in a speech to cheering students at the University of Michigan in Ann Arbor. And at a time when millions of families are wrestling with the cost of higher education, the president appeared to have a winning plank for his reelection campaign platform.

Under the president’s proposal, a college’s eligibility for campus-based aid program, including Perkins loans, work-study jobs and supplemental program for low-income students will be made contingent on the institution’s success in improving the affordability and value for students and their families.

Obama would   create a $1 billion grant competition -- similar to his Race for the Top program for elementary and secondary education -- to reward states that take action to hold college costs down. He also would launch a separate $55 million competition, to support public and private college and non-profit organizations as they work to develop and test the innovative strategies that will boost higher education attainment and student outcomes.

 And he has proposed that colleges and universities give families much clearer information about costs and quality – in effect, scorecards for all degree-granting institutions designed to provide essential information about college costs, graduation rates and potential earnings in an easy to read format.

“We are putting colleges on notice,” Obama said in his speech today. “You can’t assume that you will just jack up tuition every single year. If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down. We should push colleges to do better. We should hold them accountable if they don’t.”

During his State of the Union addressTuesday night, Obama called for a comprehensive approach to tackling rising college costs as part of a larger blue print for bolstering the economy.  “It’s   not enough for us to increase student aid,” he said. “States also need to do their part, by making higher education a higher priority in their budgets.”

While the Republican presidential campaign has focused largely on health care, taxes, foreign policy and the  ethical standards of the candidates, many families are more concerned about finding ways to meet tuition costs without wiping out their life savings or going into massive debt.

Tuition and fees at public universities have surged almost 130 percent over the last 20 years, according to the College Board, while the incomes of many middle and lower-income families have been stagnant.   Total outstanding college loans exceed a record $1 trillion, and Americans now owe more on student loans than on credit cards, according to the Federal Reserve Bank of New York.

Students are borrowing twice what they did a decade ago after adjusting for inflation, according to the College Board. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards.

According to the White House, the proposed reforms to federal campus-based aid program to shift aid away from colleges that fail to keep net tuition down and toward institutions that do a much better job would “leverage $10 billion annually to keep tuition down.”


 

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.