The President’s New Plan to Make College Affordable

Libby Kane
Posted

obama student loansCollege is expensive. Maybe even too expensive, depending on the school and the student.

Even the President agrees.

On Thursday, President Obama announced a proposal for new measures to make a college education more affordable for Americans. On a bus tour of schools in upstate New York and Pennsylvania, he outlined a plan that would make federal aid more heavily influenced by individual college costs.

During a stop at the University at Buffalo, the President explained that the goals of his plan would encourage schools to compete for students in innovative ways and help students manage the costs of their educations. He also outlined the proposal’s specific ins and outs, as follows:

  • To devise a new ratings system that would rank colleges on frugality, and those that ranked highest would receive the most federal aid.
  • To ensure that student aid would be paid over the course of each semester, instead of one installment at the start.
  • To create a system whereby colleges would receive bonus payments for each graduate who has a Pell Grant (a need-based grant for undergraduates from the federal government).
  • To ensure that student loan payments would be limited to 10% of income.
  • To encourage colleges to develop “high quality offerings” that make them more competitive with other schools.

While supporters of the plan praise the President for addressing the cost of college, others aren’t as eager to get on board. Some critics, for example worry that the basis for the college rankings is “arbitrary” and that it could stifle rather than encourage innovation.

RELATED: 4 Ways to Fix the Broken Student Loan System

But there’s one point on which it seems everyone agrees: Something has to be done about the cost of college. Right now, it isn’t uncommon for graduates to hold more than $100,000 in student loans, and the financial commitment is affecting everything from building savings to buying a house.

President Obama’s proposal is still just that: a proposal, subject to Congressional approval. But if it were to be implemented, could it be the fix we need?

Image courtesy of Flickr.

  • Justine

    Another way to help combat student debt: Help students themselves to take a little more responsibility for their financial future.

    - Put financial literacy classes in K-12 school so that students understand what racking up tons of credit card and loan debt actually means.

    - Requiring students to apply for scholarships and grants before taking out such large loans.

    Students can’t keep playing the victim all the time when there are ways already for them to help themselves. It sucked but, working while in school, taking the time to apply for academic scholarships (I’m white and upper middle-class so no finaid here), and graduating a year early cut my debt by probably more than $50,000. No magic required, just a little elbow-grease and discipline.

    • Eastwestcoaster

      I agree with you that students shold be more informed of their loans and finances. However, when I was in college out of state, because they had some of the best professors and programs in the nation and a history of their students getting employment after graduating and my state schools didn’t offer what I wanted to do in my career, my tuition would go up about 2,000 to 3,000 every semester. Please explain to me how my current income, which is decent and above average can pay for my total tuition costs well over 100,000 after graduating from undergrad and graduate school. The money I made in the summer as an intern was just for living money during the year and peanuts compared to the amount of loans I had to take out because my courseload and major was extremely demanding of my time (at school from 8 to 5:30 some days), then homework and studying for tests after with a little bit of social time with friends in between, and I had not time to work at a job in between or I would’ve failed my classes. So, while your situation might have worked for you, it doesn’t work for everyone and I agree that students have a right to demand lower tuition, it is rising faster than inflation, which is insane. To this date, there are still no plans to put a cap on tuition for any colleges and until that happens, the rates will keep climbing regardless of the regulations that Obama is trying to implement. I think this is a step in the right direction compared to about 5-10 years ago when there were no plans in place, but this is only skimming the surface, private loan lenders also need to be further regulated to cap their interest rates like the federal loans have been.

  • KatMoss

    Justine is right on the money about teaching kids to take more responsibility. How about a couple more suggestions:
    - Require that students WORK while in college. In Missouri there’s College of the Ozarks that is tuition free as long as students meet certain requirements and they require all of their students to WORK while there. Crazy concept…
    - Limit the amount of loans a student can receive. We teach a class on finances (Dave Ramsey’s Financial Peace University) and have had people come through our class with ungodly amounts of loans. One lady was 2 years into law school and had to drop out b/c she couldn’t get anymore loans. She had $100k+ in loans and no law degree. How can one even GET that much in loans?!?! Another student graduated with a master’s in social work, was making $30k/year and had $90k+ in loans.
    - Side note on financial literacy classes in K-12, our 16-year-old is actually required to take such a class, which sounds good on the surface, until we sat in on the online class with him. It’s teaching how to build a good credit score. To NEVER use cash, only use a debit or credit card. It’s barely touched on budgeting, saving, etc. What a waste.

    • Eastwestcoaster

      You are missing the point. I’m not sure what school you went to, but in my case I didn’t have the money for the ridiculous tuition fees, which is why the federal government gives student loans to people so they can get an education. Again, there has been no cap on tuition, so the loan amounts you have to borrow change constantly and always increase to ridiculous amounts. The loan companies and federal government know that they probably won’t get all the money back because they have service forgiveness programs for working in public service, so this tuition rate is really to me an imaginary number that keeps on getting inflated kind of like U.S. currency system where our government has to borrow money through federal bonds and has a potential to collapse or devalue the American dollar, because you can only pay back a certain amount of what you earn. The money isn’t going to grow on trees as they say. There is no such thing as denying a person a right to go to college to get an education if they are accepted. The system is set up to encourage getting higher education. The colleges and private lenders are just getting greedy, the feds finally are putting limits on their loans with these new Obama plans unlike during the Bush years.