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Making College More Affordable

 The President’s Plan to Lower College Tuition Is a GoodFirst Step but More Can Be Done

Julie Margetta Morgan February 2012

Introduction

In a speech a he Universiy o Michigan las monh, Presiden Barack Obama ou-

lined his plan o make sure every amily in America can aord o send heir kids ocollege—a plan he rs unveiled in his mos recen Sae o he Union address. Te

presiden is addressing a major concern or American amilies oday—75 percen o 

 Americans say college is oo expensive.

Bu colleges have been allowed o raise heir uiion unchecked or decades, and unil now 

parens and sudens—and he ederal governmen, hrough grans and loans o sudens—

 were orced o oo he bill. As i’s unlikely ha one ederal policy will reverse his rend, he

Obama adminisraion mus atack he college cos problem rom many dieren angles.

Te presiden’s plan acknowledges his by addressing hree main issues surroundingcollege aordabiliy: providing nancial incenives or colleges o lower uiion; giving

sudens beter inormaion abou heir college choices; and improving ederal nancial

aid programs. Tis issue brie explains he highlighs o he presiden’s plan and suggess

some oher sraegies he presiden should employ.

Incentivizing low tuition

Te presiden spoke direcly o colleges in his Sae o he Union address: “I you can’

sop uiion rom going up, he unding you ge rom axpayers will go down.” Using

ederal aid o incenivize savings a colleges is no a new concep—Rep. Buck McKeon

(R-CA) proposed doing so back in 2003. Bu Presiden Obama’s plan is genler han

Rep. McKeon’s because i involves a smaller po o ederal money, and i would no com-

pleely deprive noncomplian schools o aid.

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Presiden Obama’s plan would reward colleges ha oer lower ne uiion and provide a

good value o sudens by giving hem more access o campus-based aid—work-sudy,

Perkins Loans, and supplemenal gran aid or Pell Gran-eligible sudens. Colleges wih

high uiion would receive less campus-based aid, alhough i’s no clear ye jus how much

less aid hey would ge. Te presiden also proposes a Race o he op compeiive gran

program or sae sysems ha commi o reducing coss and promoing college compleion.

Te high price o college uiion is a complicaed problem ha demands a complex soluion.

Te Whie House’s plan relies upon he idea ha he hrea o losing ederal unding—or

he promise o gaining more—is a srong incenive or colleges o comply. Bu here are

oher seps ha mus be aken o encourage colleges o drive down uiion. Here are several.

Provide better ways to determine college quality

 Wih litle oher inormaion available abou college qualiy, high price is one o he

 ways a college can signal o poenial sudens ha i oers a high-qualiy educaion.Te ederal governmen mus oer prospecive sudens beter ways o gauge college

qualiy i hey wan schools o drop heir prices. One way o provide beter inorma-

ion is o require college accrediors o make public he inormaion hey collec on

how well colleges do heir jobs.

Incentivize colleges to use technology to drive down costs

Some colleges would like o limi heir coss, bu hey don’ know how o begin.

echnological advances in daa managemen, online courseware, and e-exbooks candramaically reduce spending bu only i implemened well. Te ederal governmen mus

suppor pilo programs ha show colleges how echnology can drive cos down, no up.

Start scrutinizing how colleges spend federal money

In he debae over or-pro colleges, many legislaors were ouraged ha a school would

spend he bulk o he ederal money i receives on shareholder pros or markeing

raher han educaion. Bu we acually know very litle abou how colleges spend he

ederal nancial aid and research dollars hey receive. Te presiden should expand daa

collecion on how colleges spend heir money and consider wheher he use o ederal

nancial aid money should be limied o educaional expenses.

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Help students acquire college credit for free

Sudens can engage in college-level learning or ree by aking advanage o open

courseware, like he resources oered by he Massachusets Insiue o echnology and

Carnegie Mellon Universiy . Bu o ge college credi or his learning, sudens sill have

o pay a college o ake an examinaion ha ceries heir knowledge. Te ederal gov-

ernmen should provide examinaions or oher pahways o help sudens acquire credior ree or college-level learning hey acquire hrough online courseware.

ogeher hese policies would encourage colleges o bring down heir uiion raes and

open up pahways o low-cos degrees or sudens who canno aord he high price o 

a radiional college experience. Bu even hese are no enough. Te ederal governmen

mus also give sudens and heir amilies he inormaion hey need o make choices

ha demand lower-cos, higher-qualiy opions rom colleges.

Better information

Every day sudens decide where o apply o school, wha o sudy, and how o pay,

 wih very litle inormaion on which o base heir decisions. Beter inormaion is a

key o making choices ha ensure amilies aren’ saddled wih educaional deb or

he res o heir lives.

Te presiden announced ha his adminisraion would develop a college scorecard 

o ac as a quick reerence or sudens on he cos and qualiy o he colleges hey 

are researching. Tese scorecards will be hosed on he ederal governmen’s College

 Aordabiliy and ransparency Cener websie and will include inormaion such as asuden’s likelihood o graduae and repay suden loans, average deb upon graduaion,

and likely employmen oucomes.

In addiion o he scorecard, he presiden oued plans o collec college earnings inor-

maion and is nancial aid shopping shee—a model disclosure orm or nancial aid

oers ha colleges may volunarily use.

Tese inormaion measures will ensure here’s much more available daa or sudens o

use in heir college decision-making. Bu he college scorecard and nancial aid shop-

ping shee are like Chrismas ornamens—nice o look a, bu hey won’ shine wihou

a solid ree o suppor hem. Te Obama adminisraion mus work on developing he

ree—a comprehensive sraegy or providing sudens wih inormaion rom college

choice o loan repaymen—raher han adding more ornamens.

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 As CAP’s issue brie “Buying College” argues, a comprehensive policy on college

inormaion mus consider wha inormaion sudens need, when hey need i, and

 where hey’ ll nd i. A comprehensive policy on college inormaion mus include he

ollowing ingrediens.

“Calorie-count” information boxes located where students already look

Sudens need basic inormaion abou colleges ha’s placed in locaions where hey are

sure o nd i. Jus like he nuriion labels on ood, colleges should be required o place a

 box wih basic inormaion—including uiion, graduaion raes, and average suden loan

deb—on he ron page o heir websies and on admissions and promoional maerials.

Mandatory financial aid comparison sheets

Te model nancial aid shopping shee ha he Consumer Financial Proecion Bureauand he Educaion Deparmen developed is an excellen ool. I will help sudens make

accurae side-by-side comparisons among insiuions by ensuring all schools presen

heir nancial aid packages in he same way. Bu i will only ruly be helpul i colleges

are required o use i, no jus encouraged o do so. Te presiden should urge Congress

o require colleges and universiies o adop he nancial aid shopping shee.

 Teaching students to be better college consumers

o mee he presiden’s goal o having he highes proporion o college graduaes inhe world by 2020, an increasing number o rs-generaion sudens will be applying o

college. College is an experienial service, meaning ha he bes way o gain inormaion

abou i is o experience i rshand. High- and middle-income sudens depend on par-

ens, siblings, and riends who atended college o help hem undersand wha college is

like and wha o look or in a “good school.”

Bu oher amilies need help learning how o choose a college. Te ederal governmen

can help amilies become beter college consumers hrough programs like a college

ambassadors nework  , in which college sudens use ederal work-sudy dollars and

reurn o heir high schools o ac as college advisors.

Better communication on student loan repayment

Te suden loan repaymen sysem is surprisingly hard o navigae. One o he mos

common quesions o he ederal governmen’s suden loan ombudsman—an ofce o

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assis sudens ha have issues wih heir suden loans—is “Who is my loan servicer?”

 Anoher common quesion is “How much do I owe?” And hough he ederal govern-

men oers an income-based repaymen program or sudens who sruggle wih heir

loan paymens, he upake in he program is very low.

Te ederal governmen mus make he suden loan repaymen sysem more user-

riendly by redesigning is communicaions wih sudens, rom beter suden loan exicounseling o a web-based dashboard ha connecs sudens o heir loan balances, heir

loan servicers, and repaymen opions wih he click o a buton.

 Wih beter inormaion rom college admissions all he way hrough loan repaymen,

sudens can make more meaningul choices and drive colleges oward oering he

high-qualiy, lower-cos opions hey need. As a nal measure he ederal governmen

mus ensure ha i oers nancial aid programs ha are sufcien o help sudens

achieve heir educaional goals.

Improving financial aid

Te presiden made wo big nancial aid proposals in his Sae o he Union address.

Firs, he plans o double he number o work-sudy jobs available and expand he

Perkins Loan program. Second, he would exend he uiion ax credi o help middle-

class amilies ge some relie rom he burden o heir uiion paymens.

Te ederal governmen’s premier nancial aid program, he Pell Gran, ook a big hi

a he end o 2011 when Congress changed he program’s eligibiliy crieria o limi

he number o sudens who could receive grans. Te presiden’s ocus on work-sudy and ax credis is a imely way o shore up oher programs ha migh help sruggling

sudens nance heir educaion.

o help more sudens ge he mos ou o possecondary educaion wihou burying hem-

selves in deb or leaving school or nancial reasons, we no only need more nancial aid bu

also beter aid. Ta is, sudens need programs argeed o help hem achieve heir goals o 

graduaing and nding success in he job marke. Here are wo promising proposals.

Rewarding students who succeed in college with additional aid

Low-income sudens who successully complee he rs year o college should be

awarded addiional work-sudy aid in he second year. Te addiional unding can serve

as a srong incenive o coninue heir educaion. And by argeing work-sudy experi-

ences ha provide career-relevan skills, he program can give sudens a leg up when

hey ener he job marke.

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Conditioning aid on behaviors that lead to college completion

Research on suden incenives is beginning o show ha many sudens wan o do

 beter in college bu do no know how. Federal nancial aid programs can guide sudens

oward behaviors ha make hem more likely o succeed such as aking advanage o 

academic services or atending college skill-building seminars. Te ederal governmen

can creae college-level incenives by condiioning a school’s suden aid eligibiliy uponoering qualiy suden-suppor services.

Conclusion

Presiden Obama’s Sae o he Union address laid ou a clear direcion or colleges and

or policymakers: ocus on wha maters o amilies by making college more aordable.

He oered a number o policy soluions ha would bring us closer o his goal, bu

here’s much more o do. As a rs sep Congress mus ollow he presiden’s example

 by making low-income and middle-class amilies a prioriy and implemening programsha alleviae he burden o college uiion.

 Julie Margeta Morgan is a Policy Analys wih he Possecondary Educaion Program a 

 American Progress.