Pay It Forward

On January 26th, in a speech at the University of Michigan, President Obama announced a large number of reforms to college financial aid programs, specifically tying a college’s eligibility for funding to that college’s ability to keep tuition fees down. This would apply to programs such as Perkins loans, work-study jobs and supplemental grants for low-income students. However, his speech has stirred some controversy, as state-funded colleges have already had to cut significant costs as a result of previous fiscal reforms implemented by the Obama administration. Ultimately, Obama’s reforms are positive changes, considering that most schools are ill equipped to help their students deal with the ever-increasing cost of higher education.

Education in America is quite expensive compared to education in other countries. The United Kingdom, which has a higher education system on par with that of the United States in terms of quality, has a maximum cap on education tuition of £9000 (or USD $14,300). Obama’s reforms will significantly help to alleviate the serious financial burden of American higher education.  He specifically addresses the problem of interest rates on student loans, which can be as high as 25 percent for private student loans. Obama’s plan will make it easier for students graduating from high school to apply for and eventually pay for college and will improve the work-study program.  Obama is also introducing a new $1 billion Race to the Top competition and a $55 million “first in the world” competition to reward states for improving efficiency and keeping down costs. Obama also plans to increase Perkins loans, a federal program providing low interest loans to help needy students finance the costs of postsecondary education, from $1 billion to $8 billion. All these measures will provide greater accessibility to college and will go a long way to alleviating this serious problem.

Another aspect of Obama’s plans for higher education involves releasing net costs, graduation rates, and employment information. Given the significant difficulty of paying off student debt, this information is important for students to consider when deciding which colleges they want to apply to and which courses of study to pursue. While we can understand the usefulness of such information, it is imperative that the government ensure that schools, while making these statistics available, don’t use them to funnel students into particular majors or programs.  There is a temptation when dealing with this sort of information to portray a college education as simply a means to earn more money when in reality it is much more than that, and provides graduates of college with myriad lifelong benefits unrelated to a higher starting salary or career advancement; the government must be careful when dispersing this information to note that you can’t judge the value of a degree in dollars and cents.

Obama’s reforms are well intended and will have significant positive ramifications. They expand on his general proposals on education from his State of the Union speech and demonstrate his seriousness about tackling the vital issue of rising tuition and student loan rates.