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Summaries of the latest policy issues.
Affordable College Education for All Americans
“By 2020, America will once again have the highest proportion of college graduates in the world.” – President Barack Obama
By Pedro de la Torre III
April 14, 2009
Summary: The United States was once the best educated country in the world, and much of our prosperity rested on this unprecedented investment in the talents and creativity of the American people. Unfortunately, decades of public divestment from education and student aid programs, along with the progress of other countries, has led the United States to slip in its level of educational attainment.
In order to build a sustainable economy in the long-term while making sure that students and young people are not denied a college education because of the financial crisis, we need serious reform to the student financial aid system, and a major investment in college access, completion, and affordability. Passing President Obama’s budget proposal for 2010 would be an important step in putting our country back on track.
Problem:
- The current generation is less educated than earlier generations. Americans that are 35-65 years old are second only to Canadians when it comes to post-secondary degree attainment, but 25-34 year old Americans are ranked 10th place. The US currently ranks 15th in the number of degrees and certificates awarded per 100 students enrolled.
- The Lumina Foundation estimates that the American Economy will face a shortage of 16 million college educated workers by 2025.
- A college graduate can be expected to make around $1 million more over the course of his or her working life than a high school graduate.
- Student aid has often failed to keep up with college costs. The Pell grant, which helps low and middle income families, covered 72% of the average cost of attendance for a public four year college in 1976, but only 33% of this cost in 2006.
- We are leaving too many talented young people behind, especially those from low-income or minority families. The highest achieving low-income high school graduates go to school at about the same rate as the lowest achieving students from wealthy families. For those that do attend college, large class and racial disparities exist in completion rates. Almost 67% of white students earn a bachelor’s degree from any school within six years, while the same can be said for only 45.7% of non-Hispanic black students.
- Nearly one in four public college graduates, and nearly 40% of graduates from private colleges, have student debt levels that would be unmanageable at the starting salary of a teacher.
Progressive Budget Priorities:
- Make Pell Grants More Reliable
The Pell grant is the most important source of aid for middle and low income students. Currently, Congress must fund the program through the annual discretionary budget process, which in practice has meant that the maximum award tends to remain the same for long periods of time. Congress should make sure that the 2010 budget provides for swift passage of legislation to increase the maximum award to $5,550 for the 2010-11 school year, make the Pell Grant a mandatory program, and tie the maximum award to 1% over the Consumer Price Index to prevent declines in the grant’s purchasing power.
- Create State/Federal Partnerships for College Access and Completion Rates
Currently, there are too few programs addressing the issues of college access and completion on a large scale, and these programs do not always provide the kinds of information that could be used to refine future efforts on this issue. Congress should create a $2.5 billion fund for the development of state-federal partnerships that aim to increase access and completion rates, particularly for disadvantaged and underrepresented students. Congress should make sure that these partnerships include a research component to ensure improve our knowledge of what kinds of programs work, and which do not.
- End Wasteful Financial Aid Programs, and Make Student Loans Reliable
The Department of Education manages two programs to provide the same federal loans to students: the Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Loan Program (DLP). In the DLP, the government lends directly to students, but in the FFELP the government grants private companies subsidies and guarantees against default. The Congressional Budget Office estimated that originating all future federal student loans from the DLP will save taxpayers $94 billion over ten years. In addition to being more expensive, FFELP is has a higher cohort default rate, is more prone to corruption, and is less reliable for students. As Education Secretary Arne Duncan said, this program is “on life support.” The Department of Education was forced to begin purchasing FFELP loans to keep the program from collapsing, essentially providing lenders with the capital they need to make new loans. Congress should originate all new student loans from the DLP, and utilize the savings to reform and expand student aid programs like the Pell Grant. The budget should provide additional resources to the Department of Education in order to help schools with the transition to the DLP.
- Reform and Expand the Perkins Loan Program Perkins loans have a low interest rate (5%), and must be used to help cover demonstrated financial need. They differ from other federal loan programs in the degree of leeway that college financial aid offices have as to who receives the award. Unfortunately, the current formula for distributing the funds to schools tends to disproportionally benefit wealthier schools like Harvard, rather than community colleges and public four-year universities. Congress should expand the current program by making up to six billion dollars available each year, and change the formula to encourage institutional need-based aid and reward schools that graduate students from working families while keeping tuition under control. These reforms will provide targeted assistance to students that would otherwise turn to private loans, and are a good alternative to raising federal student loan limits, which would cause student debt levels to spike.
Status:
Both the House of Representatives and the Senate have passed budget resolutions for 2010. The House’s version of the resolution is stronger when it comes to higher education, since it includes budget reconciliation instructions for student loan reform. Budget reconciliation is a process that limits the length of debate, and, more importantly, allows for a bill to pass the Senate with a simple majority vote. Despite much angry rhetoric, reconciliation has been used by both parties for a variety of legislation, including:
- The College Cost Reduction and Access Act, which cut wasteful subsidies to student loan companies in order to cut interest rates on federal student loans and expand need-based student aid.
- The 2001 Bush Tax Cuts – A $1.35 trillion bill that reduced the income tax rates for top earners, adjusted the Alternative Minimum Tax, etc.
- The 2003 Bush Tax Cuts – A $900 bill that reduced income taxes for top earners, adjusted the Alternative Minimum Tax, reduced the capital gains tax, etc. These tax cuts passed with only 51 votes, one of them being then-Vice President Cheney’s.
The Senate also approved a problematic (but non-binding) amendment sponsored Sen. Lamar Alexander (TN) by unanimous consent to their version of the budget resolution that could rule out real student loan reform.
The budget resolutions must now be reconciled by a conference committee, and approved on the floor of both chambers of Congress. The use of reconciliation, as well as the problematic language introduced in by Sen. Alexander, depend on this committee’s decisions. After the budget resolution is passed by congress, work on reconciliation bills will be possible.
You can stay up to date on the 2010 budget at Funding Our Future, Campus Progress’s blog on the budget and economic issues affecting young people. You can learn more about the budget process using the Washington Post’s useful interactive tool.
Take Action:
- Take action online to pass a progressive budget at campusprogress.org/budgetforprogress
- Set up a meeting with your Senator or Representative while they are in-district for the Congressional Spring District Work Period (April 3-17). Campus Progress put together a helpful toolkit to help you take action.
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Comments
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wheres the outcry over tuition cost due in part to bloated administrations and prof salaries. we spend more on education as a percentage of gdp than any other country in the world yet we’re ranked 15th, and all you want is more. i have a solution,spend the money you’re receiving more efficiently and quit bowing at the alter of the teachers unions.
— devin perteet - Apr 15, 09:43 AM - #Let’s all get behind Obama’s approach to making all student lending direct. Banks as middlemen focus on profits. $100 billion a year can be freed up with direct lending.
— Bill - Apr 15, 10:38 AM - #When you say that there has been decades of public divestment from education and student aid programs, do you have some statistics in mind. I’d be interested to see those numbers. Thanks!
-Dan
— Dan - Apr 16, 03:51 PM - #When you say that there has been decades of public divestment from education and student aid programs, do you have some statistics in mind. I’d be interested to see those numbers. Thanks!
-Dan
— Dan - Apr 16, 03:52 PM - #While I agree that something needs to be done about the rapidly inflating cost of college tuition (and the following problem in affordability), I do not think that more government loans are the answer. When the government makes large amounts of cheap loans available for a specific commodity (in this case, tuition), the costs skyrocket making it even harder for people to afford (they either can’t take out a big enough loan, can’t afford it without a loan, or end up stuck with a freakishly large loan to pay down). For reference, see the housing bubble – home prices spiked to over 200% of their historic inflation-adjusted value when Congress started pushing affordable housing initiatives.
— Bob - Jan 18, 10:09 PM - #