By Christi Parson & Kathleen Henesses
President Barack Obama embraced the idea of federal action to restrain the rapidly increasing cost of higher education, giving a boost to a long- simmering policy idea that has gained steam amid growing frustration with rising tuition.
His proposal that colleges and uni- versities cut costs or risk losing out on some federal aid was part of a larger package of “college affordability” ideas unveiled by the president Friday in a speech at the University of Michigan. Obama wants to increase funds for higher education, mostly through an expansion of federal loan programs. He also will require colleges and uni- versities to give families standardized information to allow comparison shop- ping on financial aid packages, gradu- ation rates and employment prospects for a college’s graduates.
Obama also called for Congress to act to prevent a doubling of the interest rate this summer for the government’s subsidized Stafford loan program, which covers more than 7 million students. The rate is scheduled to increase from 3.4 percent to 6.8 per- cent on July 1. White House officials believe a late-spring confrontation over the loan rate could put Republicans in a politically costly position much as the debate over the payroll tax cut did in December.
But creating federal incentives to cut costs was the proposal that caught education experts’ ears. Members of Congress, including some leading Re- publicans, have proposed similar ideas in the past, but college and university officials have opposed them, and the plans have gone nowhere. Obama’s speech marked the first time such a proposal has received a presidential endorsement.
Schools can’t just “jack up tuition every single year” and simply expect people to pay it, Obama said. “If you can’t stop tuition from going up,” he warned colleges, “the funding you get from taxpayers every year will go down.”
“I am only standing here because scholarships and student loans gave me a shot at a decent education,” Obama told the crowd at the Ann Arbor campus, where students braved early-morning snow to stand in line to see him. “Your president and your first lady were in your shoes just a few years ago,” Obama said. “We didn’t come from wealthy families. The only reason we were able to achieve what we achieved was because of educa- tion.”
Tuition increases have outstripped inflation for years, and the rising cost of college, coupled with deep cuts in state funds for public university systems from California to New York, have caused a clamor for solutions that could make college more afford- able.
Under the Obama plan, schools that raised tuition beyond what the govern- ment deems an acceptable level could lose some of the billions of dollars in campus-based financial aid awarded by the federal government each year. Schools that demonstrate improvement would have a leg up in the yearly com- petition for money.
The proposal drew a mixed re- sponse from higher-education officials and experts.
Adding accountability to the billions of dollars the government makes avail- able for financial aid is a reasonable request, said William Tierney, direc- tor of the Center for Higher Education Policy Analysis at the University of Southern California.
“The reality is the federal gov- ernment provides funding to these institutions through students, and all the federal government is trying to do is ensure that the money they’re spending on our behalf is being wisely spent,” he said.
University of California system President Mark G. Yudof said the main cause of the sharp tuition inflation at many state universities, including UC, has been a deep cut in the support the schools receive from state budgets.
“If the state subsidy is going through the floor, there are only so many places we can go to for fund- ing,” Yudof said. UC has cut the cost of an average credit hour of courses by 15 percent in recent years through increasing class sizes and making
systems efficient, but tuition still had to be raised to make up for reductions in state support, he said.
Yudof and others also warned that any federal effort would need to take into account the amount of money schools set aside for financial aid. UC, for example, sets aside a third of its tuition to pay for financial aid for low- and middle-income students. One way to lower tuition would be to reduce that set aside _ the opposite of what Obama would like to achieve, he noted.
Obama’s plan would increase the government’s Perkins loan program from $1 billion to $8 billion. Perkins’ funding is allocated to schools, that provide loans to its students. Because students repay Perkins loans with in- terest, the increase would not worsen the federal deficit, administration of- ficials said.
Republicans gave Obama’s propos- als mixed reviews. Rep. John Kline, chairman of the House education committee, praised the plans’ call for greater accountability and transpar- ency, but seemed to throw cold water on extending the current low interest rate on Stafford loans.
“The interest rate hike students face is the result of a ticking time bomb set by Democrats five years ago” when the interest rate was reduced, Kline, R-Minn., said in a statement. “Simply calling for more of the same is a dis- service to students and taxpayer.”