Obama Plan Ties College Financial Aid Eligibility to Affordability and Value
President Obama on Friday outlined a plan hinted at in his State of the Union address that would overhaul the way colleges and universities gain eligibility for campus-based financial aid programs by linking the aid to a school’s success in improving affordability and value for students.
In a speech at the University of Michigan, Obama talked about his ideas for the future of Perkins loans, which are low-interest student loans for low-income borrowers, work-study jobs, and Supplemental Education Opportunity Grants for low-income students. Under his plan, Perkins loan funding would grow from $1 billion to $8 billion, a $1 billion grant competition would be created, similar to the Race for the Top program used by elementary and secondary education, to reward states that keep college costs down, and another $55 million competition would be created that would rewards individual colleges for increasing their value and efficiency.
Additionally, Obama said he wants to make paying for college more straight forward by requiring colleges and universities to provide a “shopping sheet” that makes it easier to compare the true costs of colleges that students are considering. The shopping sheets would give families clearer information about costs and quality, as well as compile data on the earning and employment statistics of graduates.
The administration said that the current financial aid system provides perverse incentives for keeping college costs high and that the goal of the plan is to reward schools for lower net tuition prices, restrained tuition growth, enrolling and graduating low-income students, and graduating students who are able to find jobs and repay their student loans.
Administration officials said that the expansion of the Perkins loan program would not require new tax dollars, since they, like other student loans, are repaid with interest. The officials also said that no new money would be required to change the formulas for awarding funds for federal work-study jobs or the $1 billion supplemental grant program.
The programs Obama discussed changing, in contrast to the much larger Pell Grant and federal student loan programs, which are federally administered and can be used by students at any college, are campus-based programs that are federally funded but administered with substantial discretion by individual schools’ financial aid offices.
While increasing funding for the Perkins loan program and changing the formulas for awarding works-study jobs and supplemental grants won’t affect he federal budget, administration officials said that other things the administration would like to change — such as doubling the number of work-study jobs and maintaining the interest rate of subsidized student loans at 3.4 percent — would be expensive (“Obama Plan Links College Aid With Affordability,” The New York Times, Jan. 27, 2012).
Financial Aid Experts Warn That Federal ‘Price Controls’ Will Ultimately Hurt Students
Higher-education professionals were immediately suspicious of Obama’s plan, even before details were announced. “When we hear things like a shift in federal aid, it causes our antennas to go straight up,” said Molly Corbett Broad, president of the American Council on Education. “Anything that smacks of price controls is of great concern on many levels, especially at a time when states are cutting their budgets — and if the effect of this is to limit tuition, what else would you call it but price controls?”
Broad said that while she and university presidents across the nation shared Obama’s commitment to affordable higher education, keeping tuition prices down when institutions are being asked to absorb state budget cuts, increase enrollment, and provide more financial aid for families in need was not easy.
Other education experts worry that linking financial aid eligibility to student costs will turn colleges and universities into lower-quality educational factories obsessed with the bottom line, complete with larger class sizes and more non-tenured, lower-compensated adjuncts in lieu of professors. Additionally, they worry that public institutions that are suffering the most from declines in state funding, which are under the most pressure to raise tuition, will also be the schools that suffer the most from losing access to campus-based federal financial aid.
