Some question whether it's the federal government's place to interfere with college tuition practices.

President Barack Obama is announcing a plan to shift some federal dollars away from colleges and universities that don’t control tuition costs and new competitions in higher education to encourage efficiency as part of an effort to contain soaring college costs.

Obama will spell out his plans Jan. 27 at the University of Michigan in Ann Arbor. The speech will cap a three-day post-State of the Union trip by the president to promote different components of his economic agenda in politically important states.

On Jan. 24 during his State of the Union address, Obama put colleges and universities on notice to control tuition costs or face losing federal dollars. That’s had the higher-education community nervous that he could set a new precedent in the federal government’s role in controlling the rising costs of college.

Obama’s education secretary, Arne Duncan, said Jan. 27 that schools should get federal dollars based in part on their performance.

“Historically, we’ve funded universities whether or not they’ve done a good job of graduating people, whether or not they’ve done a good job of keeping down tuition,” Duncan said on MSNBC’s “Morning Joe.”

The money Obama is targeting is what’s known as “campus-based” aid given to colleges to distribute in areas such as Perkins loans or in work-study programs. Of the $142 billion in federal grants and loans distributed in the last school year, about $3 billion went to these programs. His plan calls for increasing that type of aid to $10 billion annually but changing the formula for how it is distributed.

This reform will reward colleges that are succeeding in meeting the following principles, according to a White House press release:

(1) Setting responsible tuition policy by offering relatively lower net tuition prices and/or restraining tuition growth.
(2) Providing good value to students and families by offering high-quality education and training that prepares graduates to obtain employment and repay their loans.
(3) Serving low-income students by enrolling and graduating relatively higher numbers of Pell Grant-eligible students.

“Colleges that can show that they are providing students with good long-term value will be rewarded with additional dollars to help students attend. Those that show poor value, or who don’t act responsibly in setting tuition, will receive less federal campus-based aid,” the White House said. “Students will receive the greatest government grant and loan support at colleges where they are likely to be best served, and little or no campus aid will flow to colleges that fail to meet affordability and value standards.” What those “value standards” are still remains to be seen.

Obama also wants to create a “Race to the Top” competition in higher education, similar to the one his administration has used to spur K-12 reforms, to encourage states to better use higher-education dollars in exchange for $1 billion in prize dollars. A second, $55 million competition called “First in the World” would encourage innovation to boost productivity on campuses. It would make grants to individual colleges and universities for projects such as course redesign through the improved use of technology, early college-prep activities to lessen the need for remediation, competency-based approaches to gaining college credit, and other ideas aimed at making higher education more efficient and affordable.

“We have to educate our way to a better economy,” Duncan told MSNBC.

Obama’s proposal also includes the creation of new tools to allow students to determine which colleges and universities have the best value.

His administration will create a new “College Scorecard” for all degree-granting institutions, designed to provide information about college costs, graduation rates, and potential earnings—making it easier for students to choose a college that is best suited to their needs, goals, and price range. It also will create an updated version of the “Financial Aid Shopping Sheet,” announced in October, a required template for all colleges that would make it easier for families to compare college financial aid packages. Obama also wants to begin collecting earnings and employment information for colleges, so that students can have a better sense of the post post-graduation outcomes they can expect.

His plan will likely be a tough sell in Congress, which must approve nearly all aspects of it except the creation of the new tools.

The Obama administration already has taken a series of steps to expand the availability of grants and loans and to make loans easier to pay back, and Obama spelled out other proposals to make college more affordable in his State of the Union address, such as extending a tuition tax break and asking Congress to keep loan interest rates from doubling on July.

His administration also has targeted career college programs—primarily at for-profit institutions—with high loan default rates among graduates over multiple years by taking away their ability to participate in such programs.

But until now, it has done little to turn its attention to the rising cost of tuition at traditional colleges and universities.

The average in-state tuition and fees at four-year public colleges last fall rose 8.3 percent and with room and board now exceed $17,000 a year, according to the College Board. Rising tuition costs have been blamed on a variety of factors, including a decline in state dollars, an over-reliance on federal student loan dollars, and competition for the best facilities and professors.

Sen. Lamar Alexander, R-Tenn., a former education secretary, said the autonomy of U.S. higher education is what makes it the best in the world, and he’s questioned whether Obama can enforce any plan that shifts federal aid away from colleges and universities without hurting students.

“It’s hard to do without hurting students, and it’s not appropriate to do,” Alexander said. “The federal government has no business doing this.”


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