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Obama’s student-aid plan may not spark game-changing reform here, initial review suggests

The president said it would pump billions more dollars into student-loan programs, but it’s unclear that this would be new money or that it would go to programs aimed at the neediest students.

Reaction was decidedly mixed among Minnesota higher-education officials to news that President Barack Obama wants to overhaul the student-aid system to tie colleges’ federal financial-aid eligibility to schools’ affordability and the overall value of the education they provide.

In a plan outlined Friday morning at the University of Michigan, Obama said he wanted to increase the amount of money available as Perkins loans from $1 billion to $8 billion, create a $1 billion Race to the Top-style grant competition to reward states that are keeping costs down and quality up, and a separate $55 million grant fund to reward schools that are doing so.

He also said he wanted colleges and universities to provide prospective students with “shopping sheets” detailing everything from the aid packages offered to graduates’ job-placement rates and wage expectations.

Top officials at the University of Minnesota, the Minnesota State Colleges and Universities System (MnSCU) and the Minnesota Private College Council were still trying to learn the specifics of the proposal at close of business Friday. All were as surprised as the general public and were gathering their intelligence from the White House website’s FAQ

Not clear that it’s new money

But an initial review of data provided by the Minnesota Office of Higher Education and the White House suggests that the initiative may not spark game-changing reform here. For starters, despite Obama’s announcement that the plan would pump billions more dollars into student-loan programs, it’s unclear that this would be new money or that it would go to programs aimed at the neediest students.

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The fine print is complicated and still being scrutinized, but it’s possible that if approved, the increase in Perkins money would actually fund more Federal Unsubsidized Direct Loans, which have higher interest rates — at 6.8 percent they are almost as expensive as a credit card — would have no forgiveness provisions for public service, and do not represent a net increase in federal spending.

Plus, Obama has no assurance he can deliver. He asked for similar increases in both fiscal years 2010 and 2011 and was turned down by Congress.

Nor would the proposal do anything to counteract plummeting state aid levels, which this year dipped below  the amount spent on higher ed in 2000 — in real dollars, not adjusted for inflation.

The Legislature last year capped tuition increases at MNSCU members at 4 percent for two-year schools in the second year of the biennium. In terms of value, the system’s institutions claim bragging rights: Tuition at two-year programs averages just over $5,100, and $7,000 at four-year programs, despite the loss last year of $77 million in revenue.

The national Association of Public and Land-Grant Universities (APLU) released a statement noting that from 1999 to 2009, the average amount of per-student state funding fell by $3,300, while tuition rose by $1,900.

“States need to adequately fund public higher education,” said APLU President Peter McPherson. “For more than a decade, states have shifted the cost of higher education to students and families.” 

‘Performance funding’ program

Finally, Minnesota’s public schools are already engaged in formal efforts to demonstrate the value of their educations. Last year’s Legislature appropriated money for 1 percent “performance funding” awards starting in the 2012-2013 academic year for schools that increase the number of degrees conferred, the number of students of color enrolled, student persistence and graduation rates.

“In terms of the general idea of making the cost of education more affordable, we’re all for that,” said Bob McMaster, U of M vice provost for undergraduate affairs, who noted that this year tuition rose just 3.5 percent, the lowest hike in a decade.

“The major push we have for our students is to make a four-year degree take four years,” said McMaster. “We want students to move expeditiously through their coursework.”    

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To that end, the U of M has increased the number of “bottleneck courses,” historically oversubscribed prerequisites such as chemistry that students need to stay on track; instituted a new advising system that flags early signs a student is struggling, such as poor attendance; and campaigned hard for financial literacy, urging students to cut out lattes before taking out new loans. 

And the number of degrees conferred is “nudging up,” particularly in science, engineering, math and technology arenas, “But it’s not going to go up by an accelerated rate because we want to maintain quality.”

U of M concerned about affordability and access

About 15 percent of Minnesota high-school graduates are minorities, compared with 18-20 percent of U of M freshmen and a comparable number of transfer students, McMaster added. “Affordability and access are two critical problems for our university,” he said. “We talk about this on a daily basis in my office.”

In 2010-2011, 197,000 Minnesota undergraduates received $677 million in Federal Subsidized Direct Loans, which are available to students from low- and middle-income families and carry an interest rate that’s half as much as the unsubsidized loans. In July, the rate is slated to double unless Congress acts. 

At the same time, the APLU, noted, the U.S. Department of Education itself needs to step into the current century. Right now, according to its statement, the federal formula for distributing funds for the neediest students to campuses is based on the number of low-income students those schools served in 1980.

“The current system to determine a college’s eligibility to participate in federal aid programs is broken and often gamed,” the statement charged. “Less than a handful of institutions are found ineligible annually.  The method used to calculate college graduation rates also is broken – part-time students and students who transfer in or out of a campus are not counted in the current rate used by the Department of Education. More effective methods of monitoring debt levels, default rates and graduation rates are needed to ensure that students make informed choices about appropriate means of financing their education in an affordable and high quality program.”

Paul Cerkvenik, president of the Minnesota Private College Council, also was still mulling Obama’s proposal Friday, but noted that the collective four-year graduation rate of Minnesota’s private, nonprofit colleges is 64 percent, “by far the best rate in Minnesota, and among the top in the nation for both public and private colleges.”

‘Net’ tuition has fallen at state’s private colleges

Council members make more than $374 million in grants and scholarships to about 90 percent of the students they serve, he said: “As a result, the ‘net’ prices that our families end up paying for tuition are about half of what the posted prices are. In fact, when we look at the most recent average net tuition figures and adjust for inflation, net tuition has fallen in each of the last two years, and it is now at the lowest level it has been since the 2002-03 school year.”

While none of the groups contacted Friday yet had an official reaction to Obama’s proposed shopping sheet, it’s probably fair to assume that they are groaning loudly behind closed doors. Last year, when it appeared that Minnesota’s community colleges would get caught by an Obama administration plan to make for-profit colleges track and disclose graduates’ debt levels, job placement rates and actual wages, administrators anticipated a record-keeping nightmare.

The U of MN’s Carlson School, for instance, knows exactly where its graduates end up and what their earnings average, but largely that’s because it is a business school. By contrast, the 14,000 students in the College of Liberal Arts use their degrees in countless ways.

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“It’s something we should be looking toward, absolutely,” said McMaster. “As an educator and a faculty member, I don’t want us to function as a job placement center. Our job is to provide an excellent education.”

Lawmakers react

During a conference call with reporters on Friday, Education Secretary Arne Duncan rattled off a series of measures the Obama administration has already taken to keep college costs low: increasing Pell Grant funding by $40 billion; establishing new loan repayment plans for federal borrowers; and instituting a $2,500-per-year tuition tax credit the administration wants made permanent.

But administration officials made clear that the federal government couldn’t, and shouldn’t, bear the burden of reducing the cost of college alone. Obama’s agenda calls for a “shared responsibility” on behalf of the federal government, state Legislatures and colleges and universities, officials said. States and schools that can keep costs low get rewarded (through the Race to the Top-style program); those who don’t could see their federal aid cut. 

“He’s calling on Congress to pass new reforms that will produce shared responsibility to address college affordability challenge,” said Cecilia Munoz, Obama’s director of the Domestic Policy Council. “States need to do their part to prioritize higher education funding and colleges need to do their part as well.

Republican Rep. John Kline, who chairs the House Education and Workforce Committee, which will have jurisdiction over Obama’s education proposals when they go before Congress, released a tepid statement on the reform measures on Friday, saying only that “we need responsible solutions that will serve the students of today and tomorrow without increasing the federal role in our nation’s education system. The president has proposed a number of interesting ideas that deserve a careful review.” A committee spokeswoman didn’t return messages asking for a clarification, though precedent suggests lawmakers, especially those who oppose Obama in Congress, will wait for specific proposals and cost estimates before speaking candidly about their prospects.

Franken, Ellison signal support

But it’s an easy political decision for some of the Minnesota delegation’s Democrats to side with Obama on what should be a popular agenda for their base. Sen. Al Franken released a statement in which he “pledges to bring down the cost of college for Minnesotans,” though he hasn’t announced what role he’ll play in taking up the agenda.

Rep. Keith Ellison has already signed on a co-sponsor for legislation that would make permanent the 3.4 percent interest rate on federal Stafford loans, a figure that is scheduled to double on July 1.

“If we don’t do something, those student loan interest rates go up, which is the exact wrong thing for students right now,” Ellison said Friday. “This bill fulfills the president’s request. I personally believe that you’ve got to make college affordable. We need to do much more, but we can start by doing this.”