By The Wall Street Journal
DETROIT — Seeking to control spiraling college costs, President Barack Obama is proposing tying federal student aid to universities’ tuition rates and the value they provide graduates.
The plan would affect three programs that provide institutions with student aid — Supplemental Education Opportunity Grants, Perkins Loans and Work Study. Under the current formula, schools with the highest tuitions get the most money, because the programs help fill the gap between what students can afford and what they are charged.
Obama would change that by rewriting the formula so that schools that keep tuition down and provide “good value” would be rewarded with more money. The White House didn’t say what would constitute good value but said the new formula would include measures such as graduation rates; that’s in contrast to the current formula, which rewards longevity in the program.
The changes, which Obama announced at the University of Michigan Friday, would need congressional approval.
“We should push colleges to do better. We should hold them accountable if they don’t,” he told some 4,000 raucous students gathered at the Al Glick Field House. He said colleges shouldn’t be able to assume they will get more federal aid if they continue to “jack up tuition every single year.”
The White House said “little or no campus aid will flow to colleges that fail to meet affordability and value standards.”
College officials had been nervously awaiting details of the program since Obama announced in his State of the Union address Tuesday he would propose tying federal aid to tuition.
It is unclear what sort of reception these ideas will get in Congress. Some have complained in the past that increasing federal aid gives colleges an incentive to increase tuition. This proposal would address that concern.
In addition, Obama proposed to double the work-study program’s $900 million budget and to increase the capacity to make more Perkins Loans, which doesn’t cost the government money but provides more financial aid. He would increase the loan program to $8 billion a year from about $1 billion.
The White House is also proposing to keep Stafford-loan interest rates at 3.4 percent. Under current law, they are expected to double to 6.8 percent this summer. An administration official said he didn’t know what the cost of that change would be.
Obama made the case for increased aid in personal terms.
“Michelle and I can still remember how long it took us to pay back our student loans,” he said. “Your president and your first lady were in your shoes not that long ago. We didn’t come from wealthy families. The only reason we were able to achieve what we were able to achieve was because we got a great education.
“That’s the only reason. We could not have done that unless we lived in a country that made a commitment to opening up opportunity to all people.”
Separately, Obama is proposing a $1 billion annual Race to the Top challenge program for public colleges, providing funding to states that maintain “adequate levels” of funding for higher education and align their college requirements with their K-12 standards. This, too, would require congressional approval.
