President's proposal on tuition, student aid raises hopes and concerns

Higher-education leaders in Maryland praised an effort unveiled by President Barack Obama on Friday to make college more affordable but expressed unease about still-emerging details that could have an impact on federal funding and student aid.

Calling access to college essential for the nation's economy, the president used two speeches — including one in Maryland — to propose an expansion of student loan programs. He challenged state and university officials to hold the line on tuition or risk losing part of their federal funding.

"We're going to ... put pressure on states to make sure they're prioritizing higher education," Obama told House Democrats assembled here for an annual conference. "We're going to make sure that colleges and universities are held accountable and that they do what they need to do to hold down costs."

Over the past decade, public university tuition increased nationwide at the highest annual rate in at least 30 years, according to the College Board's Advocacy and Policy Center. The cost of attending Maryland's public universities rose 3 percent last year at all but one state-funded school, and Gov. Martin O'Malley's proposed budget this year includes another 3 percent increase. Private institutions also have raised tuition. The Johns Hopkins University raised tuition 3.9 percent last year.

Obama, who is up for re-election this year, raised the issue of rising tuition during his State of the Union address Tuesday but offered little insight into his proposal to address the problem. On Friday, he outlined his ideas in more detail at the University of Michigan, then raised the issue again while talking with lawmakers on the Eastern Shore.

The Obama administration wants to change the formula for student aid programs — including Perkins Loans, which are need-based and have a 5 percent interest rate, and a work-study initiative for students in part-time jobs — that divvies up money based on how long a college or university has taken part in the grant program. Instead, it hopes to craft a formula that would shift money away from schools with rising tuition toward those with a "responsible tuition policy" that provide "good value" and ensure that low-income students graduate. Obama also proposed increasing the amount available annually for Perkins loans to $8 billion from $1 billion.

"How this is done will matter a great deal," said Pauline Abernathy, vice president of the Institute for College Access and Success, a consumer watchdog group focused on higher education, echoing a sentiment shared by officials at the University of Maryland who said they want more information on how the program would be implemented.

"Though it's hard for anyone to argue with the concept of focusing taxpayer dollars on schools that have successful graduates and work to keep costs down," Abernathy said.

Last year, according to the U.S. Department of Education, 493,000 students received new Perkins loan awards; the average award was about $2,000 per student. Across the country, 1,700 postsecondary institutions now receive Perkins funds to distribute to students. About two-thirds of the students who graduate from four-year colleges are leaving with debt, Abernathy said. The average debt is more than $25,000.

"My first thought is, it's the right time to do this," said Sarah Bauder, assistant vice president for financial aid and enrollment services at the University of Maryland, College Park. "There has been a lot of anxiety among families about the cost of college."

But Bauder noted that many important details are unclear in the Obama plan, including how the government would define "good value" and "responsible" tuition policies. Some of that information might not be released until the president submits his annual budget proposal next month.

"He's connecting affordability with federal aid, but the reality is it costs money to run a campus," Bauder said. "What's going to be limited if colleges can't get federal aid? What expectations from students are not going to be met?"

White House officials say the broad proposals outlined this week resulted from a brainstorming session the president held at the White House last month with higher education officials, including University System of Maryland Chancellor William E. Kirwan and Freeman A. Hrabowski III, president of the University of Maryland, Baltimore County.

In an interview, Hrabowski said he is "encouraged by [Obama's] emphasis on helping many more Americans become more educated," but said further details are needed to fully assess the proposal.

A spokeswoman for the Johns Hopkins University also had a mixed reaction.

"We share the president's concerns about the rising costs of higher education, a fact that we are addressing all the time," Hopkins spokeswoman Tracey A. Reeves said. "However, we are just beginning to learn what he has in mind, and we need time to analyze it and the details to come."

In addition to the formula changes, Obama is calling on Congress to block an impending interest rate increase for the subsidized Stafford loan program, which helps more than 7 million students pay for college. The rate is scheduled to rise to 6.8 percent from 3.4 percent July 1. And the president is proposing a $1 billion competitive grant program aimed at making colleges more affordable.

That program is modeled after the Race to the Top grant for K-12 and early education, an Obama initiative that has funneled about $300 million to Maryland.

Since 2001, the cost of tuition and fees for an in-state student at a four-year public university increased an average of 5.6 percent per year, according to a national study by the College Board's Advocacy and Policy Center. Private, nonprofit university tuition increased 2.6 percent a year on average.

Maryland's university system froze tuition for four years, until the fall of 2010, after large increases under then-Gov. Robert L. Ehrlich Jr.

Though the recent freeze was intended to make college more accessible, some schools — including Towson University and Salisbury University — reduced admissions as a financial offset. In 2009, Towson admitted nearly 1,000 fewer freshmen and enrolled 400 fewer than the previous year, even with applications reaching 15,623 in 2009, up from 11,750 in 2005.

Danette Howard, the state's interim secretary for higher education, called O'Malley's proposed tuition increase this year "modest" and said some campuses want larger increases to keep up with rising enrollment.

Anwer Hasan, chairman of the Maryland Higher Education Commission, said he believes Obama's proposal would benefit students — and parents — across the state. It'll be a process of balancing, he said, to determine the best formula for institutions to produce successful graduates while keeping down costs.

"I'm sure things will evolve over time," he said. "To me, [Obama's proposal] is a good start."

All but one of the president's proposals require congressional approval, a high hurdle given the partisan bickering that has left Washington in gridlock. However, Obama administration officials say some of the ideas have received GOP support in the past.

And they contend that an increase in Perkins loan funding would not add to the deficit, because the loans are paid back.

The only proposal that can move forward without Congress is a "college scorecard," which would break down the costs of enrollment in an easily digestible format, Abernathy said. The scorecard would be published by the U.S. Department of Education.

The Obama administration also is pushing a college "shopping sheet" that would be produced by colleges for admitted students, breaking down the costs of enrollment. If the administration wants to make such a sheet mandatory, Congress would have to approve it.

Some of the ideas have previously faced resistance from higher education trade groups on Capitol Hill, and it is unclear how those groups will respond. Many were being briefed on the proposal for the first time Friday afternoon.

"Our central concern with the proposal is the likelihood that it will move decision-making in higher education from college campuses to Washington," said Molly Corbett Broad, president of the American Council on Education. "The federal government has increasingly inserted itself in the day-to-day operations of colleges and universities."

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