DC Shuttle: Obama Outlines New Policies to Make Higher Ed Affordable

During a Friday morning speech at the University of Michigan, President Obama announced a set of initiatives to improve the quality and affordability of higher education. His proposals include tying federal financial aid to colleges’ efforts to contain costs; new competitive grant programs for states, colleges, and organizations to improve college outcomes; and making colleges’ financial and work placement information more readily available to prospective students.

The first proposal would connect $10 billion in annual federal “campus-based” financial aid to colleges’ efforts to contain tuition costs, enroll and graduate a substantial number of low-income students, and “provide good value” to students. Providing good value would include a “quality education and training that prepares graduates to obtain employment and repay their loans,” which echoes the goals of the Education Department’s gainful employment regulations, which were codified last July. The federal assistance at play under President Obama’s proposal would include an expanded Perkins Loans pool of about $8 billion, Supplemental Educational Opportunity Grants, and Federal Work-Study support. The new federal aid formula would reward colleges which “do their fair share” to keep net tuition costs down with a greater share of the aid funding pool, while those that don’t would receive “little or no campus aid.”

New Competitive Grant Programs

· The new Race to the Top: College Affordability and Completion program will be modeled after the U.S. Education Department’s Race to the Top grant program for K-12 schools and states. Under the College Affordability and Completion model, states will compete for a share of the initial $1 billion pool by submitting plans to contain tuition costs and facilitate degree completion across their higher education system. The president hopes this will incentivize maintaining support for higher education as states deal with budget difficulties. Whether state will have to undertake policy changes before applying for the grant money, as in the K-12 Race to the Top, has not been made clear.

· The $55 million First in the World competition will support public and private colleges and nonprofit organizations that develop and scale up effective strategies to improve instruction and student outcomes. The program would provide modest startup money for programs which lead to larger, long-term increases in productivity, including better use of technology and preparation strategies to reduce the need for remediation.

Information Disclosure for Prospective Students

A College Scorecard created by the administration would make it easier for prospective students to compare all degree-granting institutions based on price, financial aid, and graduation and earnings outcomes. In addition, the Financial Aid Shopping Sheet, announced as a voluntary tool to help families compare financial aid packages last October, would become mandatory for all colleges.


The proposals which affect student financial aid will require congressional approval to implement. Additionally, the president charged Congress to enact several policies to make college more affordable:

· Maintain low interest rates for student loans to reduce borrowers’ future debt loads (the Stafford loan rate is scheduled to double from 3.4% to 6.8% this summer);

· Make permanent the American Opportunity Tax Credit, which was scheduled to expire in 2012; and

· Double the number of Federal Work-Study jobs available over the next five years.

Administration officials acknowledged that the current initiative plans are broad overviews, and said that more details will be included with the president’s FY2013 budget proposal.

As a member of New England Council, we publish the DC Shuttle each week featuring higher ed news from Washington. This edition is drawn from the Council’s Higher Ed Committee Update of Jan. 30, 2012.

Founded in 1925, the New England Council is a nonpartisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England formed to promote economic growth and a high quality of life in the New England region. The Council’s mission is to identify and support federal public policies and articulate the voice of its membership regionally and nationally on important issues facing New England. For more information, please visit: www.newenglandcouncil.com.


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