Over the past several years, the Obama administration has made student aid funding a top priority, but this funding has been accompanied by a host of new regulatory requirements.
While it is uncertain exactly how Republican presidential candidate Mitt Romney's administration would approach student aid, his rhetoric suggests that he would look to streamline the federal student aid programs to reduce costs and also reduce regulations. While this rhetoric suggests cuts to federal student aid spending, Romney also said that he has no plans to cut "grants that go to people going to college" during the first presidential debate.
Despite these fundamentally different approaches to student aid policy, Obama and Romney seem to agree on two things. First, that students and parents need better consumer information about the cost of higher education and student aid so they can make more informed decisions when choosing a school and determining how to pay for it. This is an area where Democrats and Republicans in Congress also seem to agree. Second, they both would like to provide incentives for higher education institutions to keep tuition and fees from increasing.
This article provides background information about Obama and Romney's student aid policies based on Obama's first four years as president and Romney's education plan released in May. Representatives from each campaign provided details about their plans for higher education and student aid at the opening session of NASFAA's 2012 National Conference.
It is also important to remember that a President's influence on student aid policy is limited because Congress sets annual funding levels and passes legislation that has the greatest impact on award levels and eligibility criteria. Despite these limitations, the president can influence student aid policy using the authority and influence of his position and the regulatory process.
During his almost four years as President, Obama has pushed (with varying degrees of success) to increase funding for the federal student aid programs. During the Obama administration, Pell Grant spending has more than doubled from $15.4 billion in the 2007-08 award year to $34.8 billion in the 2010-11 award year. However, the majority of this increase in spending was caused by factors outside Obama's influence.
According to analysis by the New America Foundation, roughly 40 percent of the increase is due to increasing enrollment -- roughly 9.6 million students received Pell Grants in 2012, up from 6.1 million in 2008. Another 14 percent of the increase is due the expansion of eligibility standards included in the College Cost Reduction and Access Act (CCRAA) that Congress passed in 2007 and President George W. Bush signed into law. Twenty-two percent of the increase was caused by the creation of year-round Pell Grants passed by Congress as part of the Higher Education and Opportunity Act (HEOA) of 2008 and signed into law by Bush. Obama can claim some responsibility for the remaining 25 percent of the spending increase because the American Recovery and Reinvestment Act (ARRA) increased the maximum Pell Grant from $4,731 in 2008 to the current $5,550.
The recent, dramatic increase in the cost of the Pell Grant program forced Congress to make some tough budget decisions to fill an impending funding shortfall. Congress passed three pieces of legislation that limited federal student aid eligibility, increased the cost of certain student loans and eliminated the recently enacted year-round Pell Grant. The majority of savings from these bills went to shore up the Pell Grant program and maintain the maximum award, but some savings were also diverted to reduce the national deficit. It is important to note that despite Obama's vocal support for increased student aid funding, he signed these three pieces of legislation into law.
Romney is highly critical of this increased Pell Grant spending and maintains that it is driving up the cost of college. In his education plan, he notes that since 1982, the cost of college has increased by 439 percent and that federal spending on Pell Grants increased 475 percent.
"Flooding colleges with federal dollars only serves to drive tuition higher," Romney states in his education plan. He asserts that the "expanding entitlement mentality has expanded the Pell Grant program," putting it on unsure financial footing and forcing Congress to take steps such as eliminating subsidized loans for graduate students.
"A Romney Administration will refocus Pell Grant dollars on the students that need them most and place the program on a responsible long-term path that avoids future funding cliffs and last-minute funding patches," Romney's education plan states.
Despite his vocal criticism, Romney went on record during the first presidential debate stating "I'm not going to cut education funding. I don't have any plan to cut education funding and grants that go to people going to college. I'm not planning on making changes there. I don't want to cut our commitment to education."
Romney also says that the student aid programs must be simplified.
"Today it is unnecessarily complex, made up of multiple need-based grant programs, competing loan programs, and duplicative tax benefits, all of which include significant administrative costs," his education plan states. "A Romney Administration will eliminate programs that are duplicative, inefficient, or ineffective and concentrate available funds directly on helping students."
The initial education policy report released by Romney contradicts his statements during the debate that he would not cut education spending. It remains unknown exactly how Romney plans to maintain funding and also eliminate some programs.
Romney and Obama seem to share a similar strategy for lowering college costs. Romney says his administration would make it "clear that the federal government will no longer write a blank check to universities to reward their tuition increases, and [support] institutions that are pursuing innovative operating models to drive down costs."
"We have to compete and higher education has to learn to live within its means," Romney said on the campaign trail. "The right course is for businesses and universities and colleges to compete."
Similarly, Obama's FY 2013 budget proposes rewarding postsecondary institutions that keep costs down and penalizing institutions that rapidly increase costs. The proposal would tie campus-based aid to the institution's ability to keep costs down, serve needy students well, and provide good quality and value. Details of this proposal haven't been articulated, but the higher education community has raised questions about the possible metrics that would be used to determine if an institution should be rewarded or penalized.
Romney also points to burdensome financial aid regulations as a cause of increasing college costs. His administration would repeal "confusing and unnecessary regulations that primarily serve to drive costs higher, and replace them with common-sense reforms that ensure appropriate student outcomes."
Both campaigns also believe that providing better consumer information would enable students and families to better compare institutions, which would motivate institutions to cut costs to compete with other schools.
Obama and Romney also seem to agree that students and parents need better information about the cost of college. Obama launched in February an initiative to create a "College Scorecard," a one-page profile of each school, providing specific metrics like earnings information, default rates, repayment rates and employment rates. In addition, the Obama administration revealed the Shopping Sheet, a voluntary measure (except for those schools which signed on to the VA Principles of Excellence) aimed at standardizing student aid award letters.
Romney's position on consumer disclosures is nuanced. His education plan states that "students should make decisions with full understanding of data points such as completion and persistence, loan repayment rates, and future earnings." However, he also stresses that despite requirements that colleges and universities report volumes of data to the U.S. Department of Education, there is no simple way for students to access that data and interpret its implications.
To address this issue, Romney would eliminate unnecessary data collection requirements and partner with existing private-sector entities to create consumer-friendly data on the success of specific institutions of higher education.
"[T]hese ratings can be used by private lenders to evaluate the risks of lending to students at these institutions, creating incentives for schools to focus on factors related to student success," Romney's education plan states.
Despite Romney's calls for reducing spending on student aid, he joined Obama in urging Congress to spend $6 billion for a one-year extension of the 3.4 percent interest rate on subsidized Stafford Loans. This seems to be the only area of agreement when it comes to student loans.
Romney criticizes the Obama administration for advocating to end the Federal Family Education Loan Program (FFELP). Congress eliminated FFELP in the Health Care and Education Reconciliation Act (HCERA) of 2010 to help shore up funding for the Pell Grant program. Romney says he would reverse the nationalization of the student loan market and welcome private sector participation, although not specifically saying that FFELP would be reinstated.
Romney also suggests that Obama's efforts to provide student loan repayment relief through expanded Income-Based Repayment and loan forgiveness treats the symptom but ignores the causes of unmanageable student loan debt. Romney would tackle this issue by supporting "private-sector involvement to ensure students are clearly informed about their obligations when they apply for federal student loans, and that they receive support that goes beyond a call from a collections agent to help keep them on track to repayment."
The Obama administration has also taken steps to ensure students and parents have the information they need to make responsible borrowing decisions. The U.S. Department of Education recently launched the online Financial Awareness Counseling Tool (FACT) to help students manage their debt and help financial aid professionals monitor their students. In addition, the Consumer Financial Protection Bureau (CFPB) has launched several initiatives aimed at helping private student loan borrowers.
While Obama has announced his support for extending the American Opportunity Tax Credit (AOTC), a partially refundable $2,500 tax credit for higher education costs, Romney has outlined a tax plan that would allow it to expire. Data show that higher education tax benefits increasingly benefit higher-income families and some higher education experts argue that these funds would be better used for financial aid programs that more effectively target low-income students.
In New Hampshire, Romney suggested students consider attending for-profit colleges that "hold down the cost of education." Romney has praised for-profit institutions as innovators bringing healthy competition to higher education.
Obama has tightened regulations on for-profit institutions amid some reports of deceptive recruiting practices that focus on the low-income populations and recipients of Federal military and veterans' educational benefits. The program integrity regulations promulgated by the Obama administration are generally seen as targeting the for-profit sector. In addition, Obama issued an executive order that ties military and veteran education benefits to marketing and recruitment practices at postsecondary institutions, establishes new outcome measurements and financial disclosure requirements, and enhances enforcement and compliance mechanisms.
Romney is highly critical of these additional regulations.
"New forms of instructional delivery promise to provide access to new generations of students, which will be crucial to our future economic success," Romney's education plan states. "Government policies, however, have not embraced differentiated modes of delivery. Ill-advised regulation imposed by the Obama Administration, such as the so-called ‘Gainful Employment' rule, has made it even harder for some providers to operate while distorting their incentives.
Publication Date: 7/18/2012