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Commencement at the University of Southern Mississippi, 2007.(AP photo)

Following up on Obama’s plans for higher education

ASK THIS | March 23, 2009

Can the U.S., now lagging badly, regain a position as one of the world leaders in educational attainment? Pedro de la Torre III poses some questions and offers leads for reporters. (First of two articles.)

By Pedro de la Torre III

Q. In his address to Congress on Feb. 24, President Obama set an ambitious new education goal for America. He said that “by 2020, America will once again have the highest proportion of college graduates in the world.” Why is this important?

The United States once led the world in the proportion of its young people that earn at least an associate’s degree (or the equivalent) but over the past few decades the U.S. has lagged relative to other countries. This is demonstrated clearly by the data: The U.S. is second only to Canada when it comes to 35-64 year olds holding an associate’s degree or higher, but has slipped to 10th place when it comes to the number of young people (25-34) who earn an associate’s degree or higher.

College attainment rates in the U.S. have also remained fairly stagnant over the past 40 years while increasing for almost every other industrialized country. This is troublesome because we have seen an increased demand for jobs that require postsecondary training, and a decrease in the kinds of blue collar jobs that could provide a decent wage and benefits to those with only a high school education. The Lumina Foundation estimates that, unless something is done, there will be a shortage of 16 million college educated workers in the American economy by 2025.

Increasing educational attainment levels will not only help the U.S. fill this shortage and become more competitive in the global economy, it should also have a positive impact on both individuals and American society: College graduates earn more (and pay more taxes), have lower incarceration rates, higher levels of civic participation, and more.

Q. How does President Obama’s proposed 2010 budget address this challenge?

On its own, the 2010 budget proposed by President Obama is not sufficient for America to lead the world in education attainment by 2020, but it does take some bold steps in that direction. In terms of higher education, the budget would:

  • Create federal-state partnerships to increase access and graduation rates.  One of the major obstacles to improving the level of educational attainment in the United States is college graduation rates. Currently the U.S. ranks 15th in the number of degrees and certificates awarded per 100 students enrolled. There are also significant gaps between non-Hispanic white and minority students: 66.8% of white students earned a bachelor’s degree from any school within six years, while the same could be said for only 45.7% of non-Hispanic black students. Fortunately, several programs designed to improve graduation rates and close the gaps have shown promise, and, despite fears to the contrary, increasing graduation rates does not mean diminishing academic rigor.

The proposed 2010 budget would create a $2.5 billion fund for the development of state-federal partnerships that aim to increase access and completion rates for low-income, first generation, and other disadvantaged students. These programs will include a research component, which will help make future efforts to improve access and graduation rates more successful. Some in the higher education community worry that this program could be put in jeopardy by behind-the-scenes lobbying.

  • Make Pell Grants more reliable – The Pell grant is the most important source of aid for students who demonstrate financial need. It is currently funded 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. For example, between the 2002-03 and 2006-07 school years, the maximum award was increased by only $50. Because of inflation and a steep rise in college costs, the slow growth of the maximum Pell grant led to a severe decline in the purchasing power of the grant from covering 72% of the average cost of attendance for a public four year college to 33% in 2006. This funding method has also led to budget shortfalls for the program, since Congress must rely on estimates of the number of students that will qualify in order to determine how much the program will cost for any given year. 

The proposed 2010 budget would 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.  

  • Expand and reform the Perkins Loan Program – Unlike Stafford or PLUS (parent) loans, Perkins Loans are administered by schools rather than student loan companies or the Department of Education, and financial aid offices have a great deal of leeway as to who receives the award. The loan has a lower interest rate than Stafford loans (5%), and must be used to help fill a demonstrated financial need. 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. The New York Times, for example, found that in the 2000-2001 school year Brown, Stanford, and Dartmouth all received more than $150 per financial aid applicant, while the University of Wisconsin–Madison received only $0.21.  

The proposed 2010 budget would expand the current program, making up to six billion dollars available each year, and change the formula to provide need-based aid and reward graduate students from working families and schools that keep tuition under control. The administration hopes that theses changes to the program will provide targeted assistance to students that would otherwise turn to private loans, instead of raising federal student loan limits, which would cause student debt levels to spike.

  • Reform the federal financial aid system – Currently, the federal government utilizes two different programs to provide the same loans to students: the Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Loan Program (DLP). FFELP relies on private lenders, who are given subsidies and guarantees against default. In contrast, under the DLP, the federal government lends directly to students. FFELP is more expensive per dollar lent for taxpayers, more prone to corruption, and less reliable for students. The program is also broken; the federal government is currently purchasing loans made under FFELP to provide the capital that lenders need to make new loans.

The proposed 2010 budget would originate all new student loans from the DLP, and pass on the savings - $94 billion over ten years - to reforming and expanding student aid programs like the Pell Grant. The budget would also provide additional resources to the Department of Education in order to help schools with the transition to the DLP. This is likely to be the most controversial of the higher education proposals in the 2010 budget because of the opposition of student loan companies. 

Posted by Dan
03/24/2009, 12:57 PM

Obama's education plan continues to be one of his most divisive.

What do you think? Why not let him know yourself. Visit EDVOTERS.ORG and sign the petition to President Obama today.

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