President Obama Sets the Educational Achievement Bar
"In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity--it is a prerequisite." Not only has President Obama thrown down the education gauntlet, he also intends to back it up with cold, hard cash. The President made a promise early in his first 100 days to "provide the support necessary for you to complete college and meet a new goal: by 2020 America will once again have the highest proportion of college graduates in the world." In a list of 29 developed countries, the U.S. currently shares 15th place with Korea and the Netherlands, according to "Measuring Up 2008," a study by the National Center for Public Policy and Higher Education.
Funding for Education
Two bold steps down the path to educational redemption include the American Recovery and Reinvestment Act (ARRA) of 2009, signed into law by President Obama on February 17, 2009, and the proposed 2010 federal budget, which promises reform to a number of federal financial aid programs.
What Can ARRA Do for You?
The overall goals of the education component of ARRA are "to stimulate the economy in the short term and invest in education and other essential public services to ensure the long-term economic health of our nation." In addition to $77 billion in direct funding for elementary and secondary schools nationwide and up to $33.6 billion to individual states for elementary and secondary school modernization, ARRA provides $30.8 billion to address college affordability.
ARRA and College Affordability
Funding for postsecondary education includes over $17 billion to increase the Federal Pell Grant annual maximum award from $4,731 in 2008-09 to $5,350 in 2009-2010 to $5,550 in 2010-2011. The Federal Work Study Program is slated for a boost of $200 million, which would increase student job opportunities. An additional $13.8 billion would fund an increase in the tuition tax credit from $1,800 to $2,500 annually for families that earn up to $180,000.
Obama Budget Proposes Changes to Financial Aid Programs
The 2010 federal budget also proposes a number of changes to elementary and secondary education funding as well as implementing incentive grants to support innovative state programs aimed at helping low-income students complete their postsecondary educations. In addition to these efforts to strengthen early education, the 2010 federal budget proposes to simplify the financial aid application process and implement major changes to the following federal student aid programs:
- Federal Pell Grant
- Federal Student Loan
- Federal Perkins Loan
Federal Pell Grant Program
The 2010 federal budget proposes that funding for this program be mandatory rather than discretionary, to eliminate recurring funding shortfalls. Annual increases to the maximum award will be tied to the Consumer Price Index plus 1 percent, increasing Pell Grant funding by $117 billion over the next 10 years. This program benefits an estimated 7 million students from families with low and moderate incomes.
Federal Student Loan Program
The 2010 federal budget proposes that all new student loans be originated through the federally funded Direct Loan Program, eliminating the costly federally subsidized Federal Family Education Loan (FFEL) Program. The feds currently pay approximately $4 billion in annual subsidies to FFEL lenders. According to the Office of Budget and Management, these subsidies would cost the American taxpayer $48 billion over the next decade, money that could be available to increase Direct Loan Program funding. The plan also calls for tapping into private sector companies for loan collection and servicing activities.
Federal Perkins Loan Program
The 2010 federal budget proposes the following changes to the Federal Perkins Loan Program:
- Expand funding and increase the number of schools that offer Perkins Loans from 1,800 to 4,400, which would increase the number of student borrowers from 500,000 to 2.7 million.
- Transfer new loan servicing and collection activities from the school to the private sector.
- Keep the current low 5 percent interest rate but interest would accrue during in-school periods (the government currently pays the interest while the student is in school). This change is expected to free up $3.2 billion over 5 years.
- Revise the funding allocation formula to reward institutions that provide more need-based aid and keep their tuition charges at a reasonable level.
- Increase school flexibility in awarding Perkins Loans.
Support for Educational Funding
There is considerable support in the financial aid community for President Obama's commitment to and investment in education. His progressive plan to provide increased educational opportunities is a step in the right direction, but mustering the necessary support for educational funding might be significantly more difficult. The FFEL industry supporters in Congress and those with different spending priorities will make passage of the federal budget with all of the educational funding intact difficult, if not impossible.
What Do These Changes Mean to You?
Whether you're enrolled on campus or online, increased financial aid funding could make a difference in your ability to complete your education in a timely manner. Both traditional students and working adults could benefit from increased access to the grant and loan opportunities provided by President Obama's bold educational blueprint. Additional financial aid information and updates as the federal budget approval process continues will be available on WorldWideLearn.com.
- Arthur Levine • Higher Education in the Age of Obama
- Haley Chitty • A New Student Aid Era
- A New Era of Responsibility: Renewing America's Promise
- Federal Budget Resource Center
- Measuring up 2008: The National Report Card on Higher Education
- Secretary Duncan Hails Passage of President's Stimulus Package
- The American Recovery and Reinvestment Act of 2009: Education Jobs and Reform
- The Department of Education Progress Report
- White House Press Release