College Groups React to Obama's Higher-Education Budget With Praise and Caution

February 13, 2012

President Obama's budget for the 2013 fiscal year, released on Monday, reaffirms his commitment to community colleges and college access, targeting scarce federal resources to job-training and student-aid programs.

But the budget, which would provide $8-billion for a new "Community College to Career Fund" and increase the maximum Pell Grant by $85, provides scant detail on the president's more-controversial proposal to remake the Perkins Loan program, rewarding institutions that rein in tuition and produce good student outcomes.

Colleges had hoped that the budget would flesh out that plan, which Mr. Obama announced in his State of the Union address and in a speech at the University of Michigan last month. While they would welcome the additional aid, they worry that tying some federal aid to college costs and student outcomes could drive down quality and disproportionately harm institutions that serve large numbers of at-risk students.

Though the budget explains how the Perkins Loan program would be restructured (6.8-percent interest rate, versus the current 5 percent; interest accrual while in school, instead of only after; loans made by the federal government, rather than colleges), it does not say how the new aid would be distributed.

It's not surprising, therefore, that college groups reacted to the latest budget proposal with a mixture of praise and caution.

One group, the National Association of Student Financial Aid Administrators, said it embraced "the concept of shared accountability and responsibility in keeping costs down," but added that "it must be done in a way that does not impede institutional freedom or unfairly penalize schools that serve diverse student populations."

The Association of American Universities said it supported the president's goals, but felt it was "important that new funding criteria not narrowly define educational quality using short-term, quantitative measures or inadvertently provide incentives that would harm quality."

Colleges also wonder how Congress will pay for the president's proposals, given that Republicans are expected to reject Mr. Obama's plan to raise taxes on individuals making more than $250,000 a year. Already, lawmakers have tightened eligibility for Pell Grants and cut other student-aid programs to cover a shortfall in the Pell Grant program.

To help close the program's gap, long-term, the president's budget proposes limiting the in-school interest subsidy on subsidized Stafford loans to 150 percent of a program's standard completion time and reducing payments to guarantee agencies that rehabilitate defaulted loans.

Colleges fear additional cuts would be required to pay for the president's other proposals, including his plan to extend the 3.4-percent interest rate on subsidized student loans for an additional year. That proposal alone could cost up to $7-billion, according to some estimates.

In its statement, the National Association of Student Financial Aid Administrators warned against enacting "permanent changes to the student-aid programs" that would offer only "temporary solutions to long-term funding issues."

For-profit colleges, meanwhile, urged administration officials to include them in the president's job-training plans. "We encourage them to work on widening the impact of this career-training fund by partnering with all institutions of higher education," said Penny Lee, managing director of the Coalition for Educational Success. She added, "We firmly believe that no stone should be left unturned in the search to find solutions to meet the needs of the job market."