Handicapping the President's Higher-Education Proposals

February 02, 2012

President Obama's college-affordability plan is certain to win points with students and middle-class voters—two constituencies he'll be counting on in the 2012 presidential election. But can it survive a gridlocked and cash-strapped Congress, where many Republicans are wary of government involvement in tuition-setting? And can his ideas overcome opposition from the college lobby? The following chart provides details on the president's proposals and evaluates their chances in Congress.

Increase federal student aid and keep student-loan interest rates low

The details: Double the number of Federal Work-Study jobs, to 1.4 million; maintain the interest rate on subsidized Stafford Loans at 3.4 percent for an additional year; make permanent a $2,500 tax credit for college tuition and fees.

Prospects: All three proposals fall into the "Wouldn't it be nice?" category. Who could argue with helping more students enroll in, and complete, college? But the proposals are also pricey, costing as much as $10-billion a year, according to some estimates. Coming up with that kind of money at a time when lawmakers are preparing to slash $1-trillion from domestic programs will be impossible without major cuts to other programs. Still, given that it's an election year, lawmakers may at least postpone the interest rate hike till after November, to avoid alienating student voters.

Link student aid to college costs

The details: Increase the Perkins Loan Program to $8-billion from $1-billion; change the formula for distributing campus-based aid so that it rewards institutions that restrain tuition growth, offer relatively low net tuition, graduate relatively high proportions of Pell recipients, and prepare graduates to obtain employment and repay their loans.

Prospects: Expanding the Perkins program wouldn't add to the federal deficit, since students must repay the loans, with interest. However, past attempts to remake the Perkins program have died in Congress (the House approved a similar plan in 2009, but the Senate nixed it). This proposal's chances this time will depend in part on how the revised program would be structured. Previous proposals promised participants at least as much money as they had received in recent years. If Obama tries to take money away from the older, more established colleges that have benefited the most under the current formula, he'll face strong opposition. Likewise, public colleges will protest if they feel they're being punished for raising tuition in the face of state budget cuts. Four-year colleges will also oppose the effort to tie federal student aid to loan-repayment rates—an approach that has so far been reserved for short-term vocational programs subject to the "gainful employment" rule. And community colleges won't tolerate a graduation-rate measurement that leaves out part-time and transfer students, as the current federal formula does. One thing is certain: This idea won't go over easily.

Extend to higher education the president's signature Race to the Top program for elementary and secondary schools

The details: Provide $1-billion in grants to states that restructure their higher-education financing, align entry and exit standards with secondary education, and maintain "adequate levels" of spending on higher education.

Prospects: Like the president's Perkins plan, this idea is not new. In his budget for the 2012 fiscal year, Mr. Obama called for $50-million to encourage states to make systemic changes in their higher-education systems. But Congress, faced with a shortfall in the Pell Grant program, couldn't come up with the money. The year's budget promises to be even tighter. Even if the idea does get financed, there's no guarantee that the money—less than a quarter of what has been promised to states under the Race to the Top program for schools—would be sufficient to stem recent cuts in higher-ed budgets.

Provide consumers with more information on college costs and quality

The details: Collect graduates' earnings and employment information from colleges; create a "college scorecard" with "essential information about college costs, graduation rates, and potential earnings"; and standardize colleges' financial-aid award letters to make it easier for students to compare offers.

Prospects: The government already collects earnings and employment information from vocational programs, as part of the new gainful-employment rule. But four-year colleges have not been required to provide this information, and will undoubtedly argue that it is too difficult to collect and doesn't reflect their graduates' long-term earning potential. The colleges are also likely to oppose efforts to make mandatory a model financial-aid form that the Education Department and the Consumer Financial Protection Bureau released in October. Like the Perkins proposal, this idea faces an uphill battle.