Obama addresses tuition and financial aid in State of the Union

In his State of the Union address last Tuesday and again at the University of Michigan Friday, President Barack Obama sent a message directly to universities across the country, including the University of Nebraska-Lincoln: Keep tuition under control, or get less federal funding.

 

"We can't just keep subsidizing skyrocketing tuition; we'll run out of money," he said in the State of the Union, calling college attendance and affordability an "economic imperative."

 

"If you can't stop tuition from going up, the funding you get from taxpayers will go down," Obama said.

While delivering that warning, Obama also announced proposals to increase the federal funding universities can use and make student loans cheaper to pay back. It's all to make college more affordable, Obama said, at a time when student debt is more than the country's credit card debt and income inequality is at historic levels as the economy slowly turns back from the recession.

 

The federal funding in question doesn't include the aid that goes directly to students, like standard Stafford loans or Pell grants. It instead comes from campus-based aid, which goes to colleges first to be given out to students.

 

That aid includes Perkins loans, work-study jobs and supplementary grants that go to the lowest-income students. A college's funding for these programs would depend on its control of tuition if Obama's proposal becomes law. He suggested streamlining programs to control tuition.

 

While his ideas are in the beginning stages, however, Obama has found some support already here at UNL, where about 60 percent of students borrow money for college.

 

"That sounds like a good idea to me," said Shelby Koenig, a freshman biochemistry major. "I would say getting a college education is important. I think the government should do what they can to make sure everyone has the opportunity."

 

Nur Azrina Azmi, a junior nutrition and health sciences major from Pennsylvania who said she receives federal grants to help pay out-of-state tuition, put her support even more bluntly. "If it makes tuition more affordable, yeah, of course," she said with a laugh.

 

Increase Perkins Loans Funding

 

The Perkins Loan Program was one of the first student aid programs put in place by the federal government. These loans are given out by universities like UNL to students with exceptional need, and have a fixed interest rate of 5 percent.

 

Obama's proposal includes and increasing Perkins loans funding from $1 billion to $8 billion, which would raise the number of participating universities from 1,700 to 4,000.

 

UNL hasn't received any major new Perkins funding from the government in years, said Craig Munier, the director of the Office of Scholarship and Financial Aid, in an interview, because the loans replenish themselves.

 

"All we're doing is loaning the money that people pay back," Munier said of Perkins loans, one of the first federal student aid programs. In the 2010-2011 academic year, the university gave out $1.4 million in those loans to more than 1,200 students.

 

Because the loans don't need much replenishment once they get rolling, the Obama administration has said this measure wouldn't raise the federal budget.

 

"They must be going to look at schools that would qualify for Perkins if they had enough money," Munier said of the administration. "There's some desire … to get federal dollars moved around to where they're most needed today instead of where they were most needed in 1960."

 

Double the Work-Study Program

 

Obama also wants to double the number of work-study positions available on campuses around the country during the next five years.

 

Through this program, an eligible student who's then hired by the university will have most of his or her wages paid by the government, making that student more attractive to cash-strapped departments.

"It gives them an advantage," Munier said, though it's not a guaranteed job. "It's a hunting license for jobs on campus, and sometimes in the community."

 

At UNL, the government pays 70 percent of such a student's earnings. UNL received almost $3 million in this funding last year, according to Institutional Research and Planning, while it paid only $1 million for those wages, Munier said.

 

If every student received the maximum $2,900, more than 1,000 students benefitted from the program last year. If the money were doubled, the student count likely would as well, though Munier added that the few who reach that $2,900 limit might be considered for more.

 

Nationally, the government paid colleges and universities nearly $1 billion in 2011 in work-study funds, according to the U.S. Department of Education.

 

Unlike the Perkins proposal, this idea won't pay for itself. Munier was supportive of the proposal, partly because the impact of work-study can spread. For example, Munier said, 125 students currently tutor in seven local elementary schools.

 

"Expanding the work-study program is exciting to me," he said. "The only reason it's not bigger than 125 students, quite honestly, is we don't have enough money."

 

Make Interest Rates Low and Tax Breaks High

 

Obama's proposals also spread beyond campus-based aid to the standard Stafford loans. Subsidized Stafford loans, available only to undergraduates after Congressional changes last summer, have had their interest rates steadily lowered over the past several years from 6.8 percent to 3.4 percent.

 

That cut expires next year, meaning unless Obama gets his way in Congress, interest on student loans will double.

 

Obama also called on Congress to extend the American Opportunity Tax Credit, which began in 2010 and is worth up to $10,000 in four years toward tuition costs for relatively low-income students. Some credit is available even if a student owes no taxes. That credit is set to expire this December.

 

Because much of the president's proposed increases include partial matching or funding by individual universities, each dollar in this plan has a bigger splash than other possibilities, Munier said.

 

"You can help a lot more people with what the president's proposing than by putting the same dollars in Pell," he said, though he was quick to add that "we need both."

 

Potential Impact

 

But the threat of cutting federal funding from schools that don't keep tuition down might be small for not-for-profit universities like UNL. Last year, the funding for campus-based aid to UNL amounted to just over $3 million, small change when compared to an overall budget of more than $1 billion.

 

And while UNL's tuition has increased by about 5 percent each year for the past four years, the university stands well within the Big Ten Conference. Only the University of Wisconsin has lower in-state tuition, while UNL's out-of-state tuition is lower than all but Wisconsin and the University of Minnesota.

 

"We have continued in this state to have a great interest in keeping tuition as low as possible, and that's not a new idea," said Christine Jackson, UNL's vice chancellor of business and finance. "No one's waking up in Nebraska thinking, ‘Oh, we've got to be cost-effective.'"

 

Munier speculated that the hammer would fall harder on for-profit universities, where tuition increases aren't limited by politics and public approval like at a public university.

 

Around the country, many education officials reacted with caution or alarm at Obama's proposals, with some saying that a push for quicker, leaner programs could hurt quality.

 

"We want to do that in ways that don't compromise the quality of the educational experience," Munier said.

 

Presidential Politics

 

Obama will likely face a larger enemy in Congressional Republicans, who have become notorious for resisting his legislative agenda. He simplified loans and lowered interest for some students last year by executive order — this time, that's not an option.

 

"Tuition is too high at most schools, but it isn't the job of the federal government to punish those schools," Rep. Virginia Foxx (R-NC), chairwoman of the House Higher Education subcommittee, told The New York Times last week. "It's very arbitrary, and the president sounds like a dictator."

 

Students here were somewhat pessimistic on the bill's future.

 

"I'm not sure I see it happening," said Josiah Fuchser, a senior dietetics major. "Not a lot's getting done with Congress and Obama — they don't work together very well."