On Friday, President Obama met with a family struggling to afford the cost of college and released a new analysis of the impact of his plans to increase student aid. The President reinforced his commitment to making Pell Grant an entitlement program and his proposal to end the private Federal Family Education Loans program.
According to the Obama adminstration, the President's proposal would:
Restore Pell Grants to a Strong Foundation for Student Aid: The value of Pell Grants have fallen from 77 percent of the cost of attending a public university to 33 percent over the past three decades. The ARRA invested $17 billion, making it possible to increase Pell by $619 for 7 million students. But these funding increases are only temporary, and without additional resources the value of the maximum Pell Grant will fall by $1,400 in 2011. President Obama is committed to a strong, reliable Pell Grant program. He will make Pell an entitlement, provide $116 billion over the next decade to prevent any drop in the size of Pell Grants, ensure that they continues to grow faster than inflation, and eliminate the frequent budget shortfalls that have plagued the program.
Reform Student Loans: The guaranteed student loan program pays banks and other lenders a guaranteed rate of return and reimburses them for defaults, giving them profits set by the political process rather than won in a competitive marketplace. The Obama-Biden Administration will expand the alternative Direct Loan program, which is administered by private sector companies selected through a competitive process and paid based upon performance. Direct loans have essentially the same terms for students and are more reliable and efficient. They will save $48 billion over the next decade according to the Office of Management and Budget, which will be reinvested in Pell Grant scholarships for students.
Cut Taxes on College Tuition: The ARRA created the American Opportunity Tax Credit, which will give millions of families up to $2,500 each to help pay for college. The credit was also expanded to help families too poor to owe income taxes. But the credit expires at the end of 2010. The President's Budget would make it permanent.
Make a New Commitment to College Access and Completion: Only 65 percent of students starting at four-year colleges and 38 percent of students starting at two-year colleges earn a degree within six years. The President's Budget includes a five-year, $2.5 billion fund to improve college access and help America's colleges and universities graduate more students. The fund will identify, test, and promote what works in boosting college enrollment and persistence.
The president was firm on his plans to make some form of changes to FFEL, saying, "The banks and lenders who have reaped a windfall from these subsidies have mobilized an army of lobbyists to try and keep things the way they are. They are gearing up for a battle. And so am I. They will fight for their special interests. I will fight for America's students, and their families."
NASFAA has submitted its National Conversation Initiative Preliminary Recommendations to the President and his administration, including a student loan reform proposal that woud leverage the best of all three existing loan programs and a plan to reduce student loan burdens by increasing and making Pell Grants mandatory. The response from the administration and congressional leaders was positive, and NASFAA is working to find a workable alternative to the president's proposal to abruptly ending the FFEL program.
A video of the President's remarks is avialable on the White House's Web site.
Media Coverage
Obama Slams Lenders and Colleges Inside Higher Ed
Obama Chides Colleges to Curb Spiraling Tuition The New York Times
In Televised Speech, President Obama Takes On Lenders The Chronicle of Higher Education
Obama: Cut banks out of student loans UPI
Obama Spotlights Student Loan Reform The Washington Post
Student lending program targeted The Spectrum
President Obama wants government to be primary financier of student loans NY Daily News
Posted 04/27/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
