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Business Officer Magazine
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Federal File

Coverage of legislation and regulatory activity that affects higher education

By Liz Clark

President Obama Presents a Value Proposition for Higher Education

Fast Facts: Five Key Higher Education Elements in Obama's FY13 Budget Proposal

  • Reforming campus-based aid. Distribution of federal campus-based aid—specifically the Supplemental Educational Opportunity Grants and the Work-Study program—to be tied to three principles: setting responsible tuition policy, providing good value to students, and serving low-income students.
  • Creating a Race to the Top for higher education. A $1 billion investment in an initiative to encourage states to create conditions conducive to education innovation and reform.
  • Funding a First in the World competition. A $55.5 million grant program that would “develop, validate, or scale up innovation and effective strategies for boosting productivity and enhancing quality on campus.”
  • Providing new online consumer-information tools. A proposed College Scorecard and an updated Financial Aid Shopping Sheet, with collaboration between the Department of Education and the Consumer Financial Protection Bureau (CFPB).
  • Continuing and increasing support for existing programs. A one-year reprieve for students from this year's Stafford Student Loans rate hike; the American Opportunity Tax Credit made permanent; and the number of work-study jobs doubled.

During the State of the Union address on January 24, President Obama placed college costs in the national limelight and spoke directly to institutions of higher education. “Let me put colleges and universities on notice,” he said. “If you can't stop tuition from going up, the funding you get from taxpayers will go down.” Later in the week, in a speech at the University of Michigan in Ann Arbor, the president laid out a plan that includes reforming campus-based aid programs to “reward” colleges that meet certain criteria, instituting a Race to the Top for higher education, and doubling the number of work-study jobs.

Underscoring his serious focus on colleges and universities, on February 13 the president chose to unveil the details of his FY13 budget at Northern Virginia Community College's Annandale campus.

Reform, Support, and Incentives

Specifics of the president's plan include five key elements:

Reforming campus-based aid. The administration is proposing to tie the distribution of federal campus-based aid—specifically the Supplemental Educational Opportunity Grants and the Work-Study program—to three principles: setting responsible tuition policy, providing good value to students, and serving low-income students.

Reform of this magnitude would require congressional legislation to change the campus-based aid program in fundamental ways. Early communications from the White House propose measuring responsible tuition policy by looking at net price, which institutions already report to the Department of Education. It is as yet unclear how the federal government would measure good value, but sufficient enrollment of low-income students would likely be evaluated by reviewing enrollment and graduation rates of Pell-eligible students.

As in previous years, Obama would like to expand the Perkins Loan program to make the loans available at up to 2,700 additional institutions. But in doing so, the servicing of Perkins Loans would be assumed by the Department of Education, which would retain the federal share of prior capital contributions into the program.

Creating a Race to the Top for higher education. The president is requesting a $1 billion investment in an initiative to encourage states to create conditions conducive to education innovation and reform. The new competitive grant program, based on the $4.35 billion Race to the Top Fund for K-12 institutions—and included in the American Recovery and Reinvestment Act of 2009—is designed to incentivize states to: revamp the structure of state financing for higher education, facilitate on-time completion, and maintain adequate levels of funding for higher education.

Funding a First in the World competition. This $55.5 million grant program would “develop, validate, or scale up innovation and effective strategies for boosting productivity and enhancing quality on campus.” The First in the World program should be of particular interest to college and university business officers eager to share models of efficiency and strategic business and operations frameworks they believe could translate well beyond a single institution.

The First in the World competition and Race to the Top for higher education both would require Congress to appropriate funds. While First in the World grants could be made by the Department of Education under current authorizations, a new Race to the Top program would need separate congressional authorization.

Governors will likely keep a close eye on the development of the Race to the Top program, particularly on any legislative provisions that require a certain maintenance of effort in order to qualify for the funds. Any proposals will be examined in detail, but the overall recognition of state funding declines for public higher education is a welcome element in the overall Obama plan.

Providing new online consumer-information tools. The White House has held a keen focus on providing consumers with clear information about college costs. In that vein, the administration is developing a College Scorecard and an updated Financial Aid Shopping Sheet, and both projects are under way, with collaboration between the Department of Education and the Consumer Financial Protection Bureau (CFPB). For the scorecard and shopping sheet, the president proposes to begin collecting information from colleges on student earnings and employment information. It remains unclear where the administration will source this data and how it will be presented to the public.

Continuing and increasing support for existing programs. This year, the interest rate on subsidized Stafford Student Loans is set to double from 3.4 percent to 6.8 percent. The administration is seeking a one-year reprieve for students from the rate hike, and would also like to make permanent the American Opportunity Tax Credit in addition to doubling the number of work-study jobs.

Colleges and universities play a critical part in America's economic competitiveness, a role fully recognized by the president in his efforts to tackle college affordability. In the State of the Union address, Obama remarked, “Higher education can't be a luxury—it's an economic imperative that every family in America should be able to afford.” Financing a college education has long been a partnership among federal and state governments, institutions, and students and their families. But now, the administration is seeking to more tightly bind that relationship to certain values and parameters.

Delayed Action, Immediate Concerns

Higher education can't be a luxury—it's an economic imperative that every family in America should be able to afford.

President Obama, State of the Union address, January 24

To implement almost any of the elements of the president's plan, legislative action is required by Congress and by several different congressional committees of jurisdiction. With tight budget restraints and little or no bipartisanship in either the Senate or the House, the ability to move any new legislation this year will be limited.

While enactment of these proposals may be long in coming, colleges and universities should be prepared for intense discussions about college access, quality, and completion. Middle-class families are deeply concerned about rising college tuition, and President Obama and many other political candidates will tap into this voter sentiment on the campaign trail.

In recent weeks, Secretary of Education Arne Duncan and Vice President Joe Biden made several appearances across the country, touting the value of a college education, while at the same time calling on colleges to hold down tuition. On February 2, the Senate Committee on Health, Education, Labor, and Pensions held what Committee Chairman Tom Harkin (D-Ia.), described as “the first of many hearings” focused on the president's higher education plan. Participants expressed bipartisan concern about college affordability.

During the coming months, as Congress prepares to respond to the president's proposals, college and university administrators should recognize that a fundamental shift in the long-standing partnership with the federal government in supporting student access to higher education will have institution and industrywide implications.

NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553, @lizclarknacubo