Obama: Raise tuition, lose federal aid

College affordability was the theme of President Obama’s speech at the University of Michigan yesterday. He called for spending more on Perkins loans and work-study programs — going from $3 billion now to $10 billion  – but only at colleges and universities that provide “value.” Students at colleges that raise tuition could lose access to loans and work-study jobs.

In addition, the president’s plan (pdf) includes a $1 billion “Race to the Top for college affordability” and a $55 million “First in the World” competition to encourage productivity innovations, reports the Washington Post.

Higher education — including community colleges and lifelong learning for workers — is “an economic imperative,” Obama said. While he proposed increasing tuition tax credits and keeping interest rates low on student loans, he said that’s not enough. “Look, we can’t just keep on subsidizing skyrocketing tuition.”

So from now on, I’m telling Congress we should steer federal campus-based aid to those colleges that keep tuition affordable, provide good value, serve their students well.  (Applause.)  . . . If you can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.

If “provide good value” and “serve their students well” means anything, it means the federal government will monitor graduation rates and employment outcomes, as well as tuition, for the entire higher education sector. Currently, “gainful employment” rules, which monitor former students’ earnings and ability to pay back loans, cover only for-profit colleges and community college vocational programs.

Following the speech, Molly Corbett Broad, president of the American Council on Education, issued a statement saying there’s concern that the proposal would “move decision-making in higher education from college campuses to Washington, D.C.”

Sen. Lamar Alexander, R-Tenn., a former education secretary, said the autonomy of U.S. higher education is what makes it the best in the world, and he’s questioned whether Obama can enforce any plan that shifts federal aid away from colleges and universities without hurting students.

“It’s hard to do without hurting students, and it’s not appropriate to do,” Alexander said. “The federal government has no business doing this.”

President Obama also touted college “report cards” showing college costs and how well graduates do in the job market.

The U.S. Education Department and the Consumer Financial Protection Bureau are working on Know Before You Owe, a financial aid shopping sheet that will let future students estimate their debt, monthly payment and likely ability to repay loans. Parents and students also have requested a breakdown of college costs and information on repayment rates for graduates at each college.

Aids experts discuss Pell reforms

Pell Grants must change to remain viable, concluded financial-aid experts at the The State of College Access 2012 Forum in Washington D.C., reports Ed Week‘s College Bound. The National Association of Student Financial Aid Administrators (NASFAA), which hosted the event, released an issue brief on the role of Pell Grants in access, persistence, and completion.

If Pell can improve its efficiency and effectiveness, it will be able to make a stronger argument for funding, said Sandy Baum, a higher education policy analyst.

“We need to think creatively about options for the future, not at the last minute, but in advance,” said Baum. “If the program collapses of its own weight, we have a huge problem.”

Pell expenditures have increased six-fold since 1976 in constant dollars as more undergraduates receive the grants, which are capped at $5,550. Now costing $41 billion, Pell escaped serious cuts this year, but could be back on the chopping block next year.

Baum is working with College Board on a Gates-funded analysis of Pell Grants. Several changes are under discussion:

Complexity – To make dollars more effective, let students know ahead of time what they could get, perhaps with a simple table to see how much they qualify for based on income. .

Tax benefits – In reviewing federal student aid, look also at how much subsidy is going to offset college costs with education tax credits for students at all income levels (25 percent of tax deductions benefit families making more than $100,000) and not just Pell Grants that help low- and moderate-income students.

Structure – Think carefully about whether the same criteria and regulations work well for 18-year-old students just out of high school and 30-year-olds looking for short-term job retraining.

Incentives – Find ways to encourage institutions not to just open the doors to college but to accelerate completion.

Savings accounts – Create a college-savings program for the children of low-income tax filers so families have a stake in college education. Consider linking the amount of Pell Grant available to how long families were considered low income.

While the federal government doesn’t track graduation rates for Pell Grant recipients, it’s believed that success rates are low.

NASFAA’s site has advice on applying for federal financial aid.