On August 22, 2013 President Barack Obama gave a speech in Buffalo, NY announcing a new proposal to help lower the cost of college for American families. His proposal wants to measure college performance through a new rating system. He states that this will give families and students the information needed to select schools that provide the best value. This proposal will tie financial aid to college performance and the plan is to start publishing these ratings before the school year of 2015. The president also wants a reauthorization of the Higher Education Act in which he will seek legislation to allocate financial aid based upon the college ratings by 2018. Students will still be able to choose the college of their dreams but the taxpayer dollars will be pointed to the higher-performing colleges that provide the most value.
President Obama wants to challenge states to fund their public colleges based on performance. He has requested a $1 billion in a Race to the Top funding which will be used for state education reforms. Emphasis will be based on the graduation success verses enrollment rate.
The president titled his proposal as “A better bargain for the middle class”. The question is will it really help the middle class. Today for most middle class families if their child attends a lower priced state university the most need-based aid will come in the form of a Federal Stafford Loan. Part of the President’s plan will be to reward colleges with a larger number of Pell Grant Student recipients. To qualify for a Federal Pell Grant a family has to have an annual income of$50,000 or less and have no assets. This part of the proposal really targets low and moderate income students. The President would like to give the bonus to colleges based on how many of the Pell students graduate. The proposal also wants to address the high dropout rates at colleges in connection with the wasted Pell grant money. His goal would be to change how the aid is dispersed. Currently students receive a lump sum at the beginning of every semester but the change will have this aid disbursed over the course of the semester. A college student who drops out would not receive the grant for the time when they are not in school.
Part of the college affordability plan addresses the loan debt of the college graduate. President Obama wants to help students manage some of this debt by educating people on the Pay as You Earn and Income-Based Repayment plans. He has proposed a payment plan that allows all student borrowers to cap their federal student loan payment at 10 percent of their monthly income. The current Pay as You Earn plan does limit required loan repayment amounts. It is limited due to a student income and does not include student borrowers before 2008 or any student who has not borrowed since 2011. President Obama’s agenda for this would start in 2014.
The Department of Education and the Department of Treasury will work with student borrowers to educate them and help them chose the correct repayment plan when they file their taxes. Those now struggling with their loans would then really understand all their repayment options. Most people are unaware of the complexities on student loan repayment as their life changes. Due to this lack of knowledge and planning, many mistakes occur.
As stated above, this information is only a proposal by the President. Time will tell if any changes will occur and if college affordability will really happen.