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President Obama's Plan Aims to Lower the Cost of College Tuition Fees

August 2013, 22
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President Obama has planned to announce a series of ambitious proposals, which aim at, making colleges more affordable and accountable by rating them and eventually linking these ratings to financial aid.

The plan of the proposal was obtained by The New York Times and is expected to cause some distress among colleges. The plan will rate colleges before 2015 school year. The colleges will be measured on the basis like graduation rates, tuition fees, debt and earnings of graduates, and the percentage of lower-income students who will attend the college. The ratings will compare colleges against their peer institutions. If the plan will gain Congressional approval, then the entire idea to establish federal financial aid to students for attending the colleges partly will be based on those rankings. 

A senior administration official said, “All these things are important for the students for choosing their college.” It is necessary for us that colleges offer excellent value for their tuition dollars. Higher education will provide families a degree of security, so students are not left with any debt which they cannot pay back.

Mr. Obama anticipated that starting in 2018; the ratings will be tied to financial aid so that the students of highly rated colleges can get larger federal grants and more affordable loans. This will require new legislation.

The administration official said “He thinks that there is bipartisan support for few of these ideas. We have seen in states where the governors have been working on them.”  He also spoke on condition of anonymity in order to disclose information which have not yet made public.

Tennessee, Ohio and Indiana have made moves toward linking financial aid to educational outcomes. In the dissenting Congressional atmosphere, it was not clear how much backing would be for such proposals.

In the month of February, the administration had introduced an online college scorecard. This will give public some information to be included in the ratings. The families can evaluate different colleges depending upon their budget. Graduates’ earnings will be a new data point, and one of the experts states that it is especially tricky to make meaningful.

“There are various types of issues, like deciding how far down the road you are looking, and which institutions are comparable,” said Terry W. Hartle, Senior Vice President of the American Council on Education, a group representing colleges and universities. “The main concern is that the Department of Education will develop a formula to impose it without adequate consultation, and that is what drives campus administrators’ nuts.”

All of the federal government’s $150 billion in annual student aid is distributed based on the number of students enrolled in a college, despite how many graduate or how much debt they incur. Under the new proposal, students can still manage whatever college they chose, private or public, but the taxpayer support would shift to higher-ranked schools.

With rising tuition fees and declining state financing, students and families are assuming a growing share of college costs. Tuition revenues will now make up about half of public university revenues, which were up from a quarter 25 years ago. With the colleges facing larger health care, pensions and technology costs, the pressure, to keep raising tuition is severe.

The average borrower will now graduate with more than $26,000 of debt. The loan default rates are increasing, and only half of those who start college graduate within 6 years.

Mr. Obama has paid attention to these concerns for some time, warning colleges and universities along with state legislators, to make higher education more affordable.

In his 2012 State of the Union address, he stated that he proposed colleges a notice that if tuition fees did not stop rising faster than inflation, financing from taxpayers would drop. In this year’s State of the Union speech, he urged Congress to consider affordability and value in awarding federal aid to students. This has to be followed up with a policy plan recommending that those measures will be incorporated into the accreditation system. 

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