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Obama Calls on Colleges to Rein in Costs, Urges Support for Students

President Obama's focus on college access and affordability in last night's State of the Union Address was welcomed in the higher education community. But his strong language of putting colleges "on notice" to rein in tuition costs left some wondering how that could be achieved in the current economic environment.

Just this week, news came out that colleges lost $6 billion in state support, an average of nearly 8 percent in the past year.

Yet the president said college shouldn't be a luxury and threatened to decrease federal support for colleges if tuition keeps rising.

"We can't just keep subsidizing skyrocketing tuition; we'll run out of money," said Obama. "States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down."

While no details were provided in the speech, a document released by the White House last night said the president is "proposing to shift some federal aid away from colleges that don't keep net tuition down and provide good value."

Obama praised colleges that were innovative by offering three-year degree programs, leveraging technology for learning, and having no-frills campuses. But Obama urged more efficiency to make college affordable because higher education is " an economic imperative that every family in America should be able to afford."

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said it's tough to remember a time when a sitting president spent so much prime time talking about financial aid during a State of the Union. While everyone wants to keep the net price of college down, it's not easy in today's economy, he said.

"We're always concerned about proposals that would penalize schools, and ultimately students, for tuition increases when many times what causes a tuition increase is out of a college's hands," said Draeger. "Decreased state appropriations, increased operating costs, because of things like energy prices, can't be controlled by schools."

David Baime, senior vice president for government relations and research at the American Association of Community Colleges, said he was encouraged that the president emphasized the fact that states need to do more to support higher education. "Our colleges have done a great deal to curb their costs," he said. "But the reality is that tuition will continue to increase if states continue to cut their support."

Obama also called for community colleges to partner with local businesses to help create jobs. Baime said he was pleased that Obama recognized the contributions of community colleges in providing job training and the need to have resources to prepare the future workforce.

To pay for college, the president said he wants to double over five years the number of work-study jobs for college students who agree to work their way through school.

Last night, he also urged Congress help lower the cost to students by halting a planned increase of the interest rate on federal subsidized Stafford student loans, which will go from 3.4 percent to 6.8 percent in July if no action is taken.

"We welcome the president's leadership in keeping interest rates low," said NASFAA's Draeger. "Having student loan interest rates double this next July is going to come as a shock to many students.".

Rich Williams, higher education advocate for US PIRG, issued a statement last night applauding Obama's position to stop an interest-rate loan hike. He noted that the move could affect 8 million borrowers. For those who take out the maximum $23,000 in subsidized student loans, the additional interest could add up to $5,200 over a 10-year payment period and $11,300 over 20 years.

"In this economy, we cannot double the student-loan interest rate," said Williams. "Students are already weighed down by state budget cuts, struggling family finances, and uncertain job prospects."

The president also proposed permanently extending the American Opportunity Tax Credit that provides up to $10,000 for four years of college. About half of all undergraduates take advantage of the benefit.

To better prepare student for college, the president challenged state governments to require students to stay in school until they graduate or turn 18 (something that 20 states do now).

In a panel discussion following the speech last night, U.S. Secretary of Education Arne Duncan said the proposal would address the high dropout rate in the county now that is "economically unsustainable and morally unacceptable." Students who do not finish high school are often condemned to a life of poverty, he said. "Graduating from high school is just a starting point," said Duncan. "If you don't have that, doors shut very, very quickly."

See Politics K-12 for a full story on the scope of the president's remarks on education last night.


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