U.S. Education Secretary Arne Duncan testified before the House Education and Labor Committee yesterday about President Obama's agenda for transforming the education system.
Regarding higher education, Duncan highlighted three permanent changes to student aid proposed by the Obama administration.
- Change Pell Grants from a discretionary program into a mandatory, appropriated entitlement and increase the Pell Grant amounts annually at a rate higher than inflation.
- Address problems with the Federal Family Education Loan (FFEL) program by moving all loans to the Direct Loan program.
- Boost the Perkins loan program from $1 billion to $6 billion per year and allocate funds to schools based on their role in keeping tuition down and providing grant aid to needy students.
In his opening remarks, Committee Chairman George Miller (D-CA) indicated that change was needed, but did not offer insight into what changes he hopes to make.
"Not enough or our students are getting the support they need to go to college - many can't afford it once they get there." he said. "The status quo isn't working and it isn't sustainable - not if we want to reclaim our leadership in this global economy."
Duncan provided some rational for the proposed changes during his testimony. Regarding the changes to Pell, he explained that the administration's approach would "provide more certainty to students and families applying for student aid about the aid that's available to them." In addition, tying the Pell Grant awards to the Consumer Price Index would help Pell keep up with rising college costs.
There was little debate between Duncan and committee members about the administration's Pell Grant proposal.
There was some contention about the administration's proposal to eliminate FFEL. The Committee's Ranking Republican Howard "Buck" McKeon (R-CA) noted that lawmakers on both sides of the aisle, students and financial aid administrators all have concerns about the administration's proposal.
"One of the reasons for this success is because the program can be tailored to best fit students' needs, thanks to the private lenders, not-for-profits, and state agencies that have all partnered with the federal government, colleges, and universities to serve students," Miller said. "If we follow the President's plan and use only a direct loan program, this would end the significant public-private partnership and replace it with the federal government and its contractors. There would be a one-size-fits-all Washington program for the more than 6,500 colleges and universities in America whose diversity is the cornerstone of higher education in this country."
McKeon also noted that eliminating FFEL would cause 30,000 people to lose their jobs.
"That said, we are not against reforming our nation's complex financial aid system," McKeon said. "Some reforms can be made. But we think it's best to have a thoughtful and deliberate conversation with all the parties. ... That way, we can make some good reforms while keeping what works in the program for all our colleges and the students they serve."
Duncan promoted the administration's proposal to eliminate FFEL by highlighting that "the FFEL structure is broken and the federal student loan programs are in need of a dependable, cost-effective way of providing college bound students and their families with the resources they need."
"The direct lending program is the best way to do that," Duncan said.
He noted that using the Direct Loan program would allow the government "to leverage the government's lower cost of funds to finance and originate student loans and private-sector expertise to service the loans." He also noted that it would save the government $4 billion a year.
"It will be more stable and efficient - reducing risk for students and lowering costs for
taxpayers."
Duncan also promoted the changes to the Perkins Loan program as a way to motivate institutions to keep costs down. He said that rewarding institutions that keep costs down and provide aid to needy students would help keep the cost of college down.
"This further builds upon Congress' recent mandate to create watch lists of colleges with high or excessive increases in tuition," He said.
Lawmakers asked many questions about how the administration would work to keep college costs down. In addition to highlighting the Perkins Loan proposal, Duncan said he expected higher education consumers to drive down the cost of college by selecting lower costing institutions. He said that there is already a growing demand for low-cost higher education and some higher education institutions have responded by offering three-year programs and no-frills higher education.
"We're going to continue to put pressure on institutions and provide incentives, but students and parents are going to be smart consumers," Duncan said.
Media Coverage
Arne Duncan, Free Market Economist? Inside Higher Ed
Duncan Brings Obama Agenda to Congress Diverse: Issues in Higher Education
By Haley Chitty
NASFAA Director of Communications
Posted 05/21/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
