Obama Proposes Penalties for Rising Tuition Rates in State of the Union Address

In his third formal State of the Union address, President Obama made college affordability and job-training a central tenant in his plan to improve the economy, proposing that Congress penalize institutions for increasing tuition rates, stop student loan interest rates from doubling in July 2012 and extend education tax cuts.

 

With an eye on the 2012 election and a focus on economic recovery, Tuesday night’s presidential address was largely targeted toward middle-class voters. Obama’s "Blueprint for an America Built to Last" includes tax breaks for companies that bring jobs back from overseas, expanded clean energy initiatives and improved and affordable job-training education.

Obama’s plan to make college more affordable and increase access to job-training education includes shifting "some federal aid away from colleges that don’t keep net tuition down and provide good value," according to a White House document released Tuesday night.

"If you can't stop tuition from going up, the funding you get from taxpayers will go down," Obama said. "Higher education can't be a luxury - it's an economic imperative that every family in America should be able to afford."

Obama also proposed that Congress stop the student loan interest rate from doubling in July 2012. Without Congressional intervention, the interest rate for Federal Direct Subsidized Loans for undergraduates will increase from 3.4 percent to 6.8 percent beginning July 1, 2012, as mandated by the College Cost Reduction and Access Act (CCRAA).

In addition, Obama’s plans for economic recovery include extending the education tax credit for middle class families, doubling the number of Federal Work Study jobs over the next five years, simplifying labor retraining programs, and improving partnerships between businesses and community colleges.

"Now you need to give more community colleges the resources they need to become community career centers - places that teach people skills that local businesses are looking for right now, from data management to high-tech manufacturing," Obama said to members of Congress.

Obama also advocated that Congress at least pass some version of the DREAM Act, if members of Congress will not pass comprehensive immigration reform. 

"Let’s at least agree to stop expelling responsible young people who want to staff our labs, start new businesses, and defend this country," Obama said. "Send me a law that gives them the chance to earn their citizenship. I will sign it right away."

Obama said the solution to college affordability and reducing student debt cannot rely on student aid alone--and that states, colleges and univerisites must also be held accountable for rising costs. In December Congress reached a deal on the fiscal year (FY) 2012 budget, which maintains the $5,550 maximum Pell Grant by cutting spending on other student aid programs and restricting eligibility.  Student aid programs have also faced a number of other cuts in the recent budget cutting climate.

"We applaud the president’s continued leadership on expanding the financial aid programs," said NASFAA President Justin Draeger. "Expanding Federal Work Study and keeping interest rates low are two initiatives where we welcome the Administration’s leadership. We’re concerned about any punitive measures that would penalize schools for tuition increases given that many of the things that contribute to tuition increases such as cuts to state appropriations or increases in operating costs are out of a college’s hands."

In contrast to his 2011 State of the Union address, Obama placed less emphasis on promoting bipartisanship in what many view as an increasingly divisive Congress.

"With or without this Congress, I will keep taking actions that help the economy grow," Obama said. "But I can do a whole lot more with your help.  Because when we act together, there is nothing the United States of America can’t achieve."

In a series of executive actions the White House sought without Congressional approval late last year, the Obama administration implemented two initiatives aimed at lowering monthly student loan payments for borrowers struggling to repay their loans. 

The administration’s plan provides:

  • Students with both Federal Family Education Loans (FFEL) and Direct Loans an incentive to participate in a special consolidation into the Direct Loan program
  • More generous income-based repayment (IBR) terms fast-tracked to become effective in 2012 instead of 2014

President Obama is expected to release his FY 2013 budget on Feb. 13.  The budget acts as a policy blueprint, and will likely include several of the initiatives mentioned in the State of the Union.

1 Comments

  • Can someone tell me what the President's definition of 'affordable' is?

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