President Obama announced on Friday morning a new proposal to limit federal student loans for students going to schools not making an effort to curb costs.
"If you can't stop tuition from going up, then the funding you get from taxpayers each year will go down," Obama said, speaking of universities at-large, to students gathered at University of Michigan in Ann Arbor. "We should push colleges to do better. We should hold them accountable if they don't."
If enacted, the pool for Perkins loans would increase from $1 billion to $8 billion, increasing the number of participating schools from 1,700 to 4,000. But the law would bar the loans from going to schools who fail to meet three criteria: keeping net tuition down, provide “good value” and serve needy students well.
“If that does not happen,” Secretary of Education Arne Duncan told CNN. “We’re going to invest less in those states or those local universities where they don’t have the best interest of the student at heart.”
The criteria remain vague. For example, the White House defines schools who serve needy students as those who are “enrolling and graduating relatively higher numbers of Pell-eligible students,” but no number is attached to the definition and it is unclear how a school could re-qualify for the loans once they are denied.
“Those kind of details would still need to be worked out,” said an administration official familiar with the proposal.
The proposal also provides incentives—not just the punishment of suspended grants—for schools who go the extra mile to meet cost and value standards.
“We want to put in place both incentives, carrots and sticks,” Duncan said on MSNBC.
The Department of Education would divvy up $1 billion in university funding to states who “revamp the structure of state financing.” States would compete for the funding, much like they do for Race to the Top funds for elementary and secondary schools. The extra money could ease the burden on public universities who have already raised their tuition to compensate for state budget cuts.
Obama will also announce a “scorecard” for students determining the value of their tuition dollars by school. All proposals but the scorecard will need Congressional approval.
The White House told the New York Times that the $7 billion boost in Perkins grants would not require a raise in taxes since the loans are repaid with interest.