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Obama’s Budget: Supporting Students, Not Banks

Eric Lotke — Wed, 25 Mar 2009 11:28:34 -0700

President Obama’s budget proposal would transform the federal financial aid system that struggling students and families rely on to pay for college. The proposed budget cuts excessive lender subsidies, moves to more efficient direct lending instead, and invests the savings in students. The changes are major steps toward making college opportunity affordable for all Americans. This report explains the impact for students, nationally and by state.

» Download the full report (PDF)
» Related Reading: The Obama Budget: A Stick In the Eye For Banks

Over the past decade, states have cut their contributions to college budgets and grant aid has stagnated. Students have been forced to pay ever higher tuition and costs. At the same time, wages are flat and savings have plummeted. Facing skyrocketing cost, students and families have increasingly turned to loans to pay for college. The number of college students graduating with over $25,000 in student loan debt has tripled in the last decade. The rising debt squeezes students and families out of higher education.

New data from the National Center on Education Statistics show that in the United States, the average cost of tuition at a public four-year college increased $1,729, or 29 percent, between 2000 and 2007. Tuition went up 5 percent last year alone.

Among other changes, the Obama budget eliminates the Federal Family Education Loan Program, which excessively subsidizes banks, and moves to the U.S. Department of Education’s Direct Loan program. The Congressional Budget office projects this move to save $94 billion over nine years. The Obama budget then redirects the savings to students. The Congressional Budget Office estimates that in 2010-2011, $5 billion would be cut from subsidies to banks and lenders, and invested in students instead.

Redirecting the bank subsidies toward Pell grants would solidify the grant program as the premier source of assistance for low-income students. The Pell grant maximum would increase from $5,350 to $5,550; the estimated national average Pell grant award would increase by $121, from $3,299 to $3,423. Increasing the award will also enable an additional 130,000 more students to attend college per $100 increase in the maximum award.

This bold move is the type of reinvestment that is needed to get students into college so they get the education they need to move the country forward.

State Impact

These reports outline the impact of tuition cost increases in each state and the difference the Obama administration's student loan proposals would make by shifting funds from bank subsidies to direct student loans. (Click here for a map by Campus Progress showing this data.)

Alabama Report | News Release
Alaska Report | News Release
Arizona Report | News Release
Arkansas Report | News Release
California Report | News Release
Colorado Report | News Release
Connecticut Report | News Release
Delaware Report | News Release
Florida Report | News Release
Georgia Report | News Release
Hawaii Report | News Release
Idaho Report | News Release
Illinois Report | News Release
Indiana Report | News Release
Iowa Report | News Release
Kansas Report | News Release
Kentucky Report | News Release
Louisiana Report | News Release
Maine Report | News Release
Maryland Report | News Release
Massachusetts Report | News Release
Michigan Report | News Release
Minnesota Report | News Release
Mississippi Report | News Release
Missouri Report | News Release
Montana Report | News Release
Nebraska Report | News Release
Nevada Report | News Release
New Hampshire Report | News Release
New Jersey Report | News Release
New Mexico Report | News Release
New York Report | News Release
North Carolina Report | News Release
North Dakota Report | News Release
Ohio Report | News Release
Oklahoma Report | News Release
Oregon Report | News Release
Pennsylvania Report | News Release
Rhode Island Report | News Release
South Carolina Report | News Release
South Dakota Report | News Release
Tennessee Report | News Release
Texas Report | News Release
Utah Report | News Release
Vermont Report | News Release
Virginia Report | News Release
Washington Report | News Release
West Virginia Report | News Release
Wisconsin Report | News Release
Wyoming Report | News Release

America's Student Debt Now!

Armand Biroonak — Thu, 11 Jun 2009 13:42:29 -0700

Attending the “Degrees of College Debt” panel at the America’s Future Now! conference last week, it was astonishing to hear dozens of graduates describe the mountains of debt they are climbing; $10,000! $50,000! $120,000 of debt! attendees shouted, when asked by the panel how much debt they had. The experiences shared in the session are not unusual. They are faced by graduates across America. Sadly, a diploma has become a financial albatross, rather than a ticket to a better financial future.

Certainly, young people today are facing an unprecedented challenge to pay for schooling — a result of skyrocketing tuition and the boom in private lending. As Tamara Draut of Demos noted, “graduates are entering today’s battered job market with an average student loan debt of close to $20,000 — but that’s only an average.” One-fourth of all students borrow $25,000 or more.

The nation’s “student debt clock” is over $580 billion and ticks higher as I write. Those billions in debt threaten the economic mobility and security of an entire generation. Carmen Berkley of the U.S. Students Association described jarringly how one in five students dropout of college — never completing a degree and leaving with the debt accumulated while in school. Add to that, the estimated 1.7 to 3.2 million qualified students that will skip college over the next decade because of the cost.

Delinquency on repayments is on the rise too, with graduates defaulting at a rate not seen in more than a decade — only accelerated by recession. That’s no shock however, when most private student loans carry a crushing interest rate of 10 to 14 percent. As Rev. Jesse Jackson of the Rainbow Push Coalition explained, attending college today is “guaranteed debt without a guaranteed job.”

Beyond jeopardizing a graduate’s future, college affordability threatens America's future. American global competitiveness has dropped. Older generations of Americans ranked number one in the world in college achievement, today the U.S. ranks nearly last among OECD countries.

Obama Administration Providing Some Relief

Robert Shireman of the U.S. Department of Education explained the steps moving forward by the Obama administration to address college affordability:

Income-based repayment – In effect July 1, 2009, this program provides a new payment option for federal student loan borrowers with repayment based on income and family size, with debt forgiveness after 25 years of payment.
Pell grant increases – Obama’s FY 2010 budget increases the Pell grant maximum to $5500 this fall; thereafter, Pell will be indexed to the consumer price index plus 1 percent to adjust for inflation.
Eliminating bank subsides – By ending the Federal Family Education Loan program that excessively subsidizes banks, in favor of the government's Direct Loan program, the move will save $47 billion over five years. The Obama budget then redirects the savings to students.
“American Opportunity” tax credit - Partially refundable, it provides middle and working class families additional help for postsecondary education costs with a maximum credit of $2,500 a year.

Demand MORE!

Recent steps taken by the Obama administration should be applauded, however, progressives must demand and push for more: restoring the Pell grant to cover the majority of tuition and fees like it has in the past; reinvestment in higher education — including community colleges — to cap tuition rates and improve quality; lastly, lower interest rates and greater bankruptcy protections to ensure higher education is no longer a huge financial risk.

Additional Resources:

.A good guide to the Income-Based Repayment program by the Project on Student Debt.

Action alerts and info: Campaign for College Affordability

Campaign for America’s Future and U.S. Public Interest Research Group, “Obama's Budget: Supporting Students, Not Banks" report.

No Child Left Behind Fails Us All

OurFuture.org Staff — Tue, 21 Oct 2008 08:55:32 -0700

Banking Collapse Lands on America’s Schools

OurFuture.org Staff — Tue, 30 Sep 2008 07:56:18 -0700

Another Student Loan Crisis?

OurFuture.org Staff — Wed, 10 Sep 2008 23:05:17 -0700