Obama tuition policy could 'dilute' quality of education

In his State of the Union address two weeks ago, President Obama discussed issues on every college student’s mind: the rise of tuition costs and interest rates on student loans.

“Student loan debt has now surpassed credit card debt for the first time ever,” Obama said while addressing an audience at the University of Michigan in Ann Arbor three days after the State of the Union speech. “Since most [college students] were born, tuition and fees have more than doubled.”

During the current academic year, federally subsidized student loans – mainly Stafford loans – are projected to average 3.4 percent according to studentloanconsolidator.com.  If Congress fails to extend the College Cost Reduction and Access Act of 2007 in July of this year, these rates will double, and students will incur thousands more dollars of debt – a figure currently averaging around $24,000. This increase arrives at a time when banks are borrowing federal money at the lowest rates in history.

Students unfamiliar with debt might wonder: How will it all add up years down the road?  Obama addressed this, too: a new initiative called “Know Before You Owe” may help students to grasp the long-term implications of their borrowing.

“Accumulated interest can catch people off-guard,” said Gary Hoover, a professor of economics at the University.  “‘Know Before You Owe’ will show students all of the numbers.”

Additionally, Obama has capped student loan payments for many graduated Americans at 10 percent of their monthly disposable income.  This is a decrease from the recent cap set at 15 percent.

Despite these positive measures, increasing tuition rates exacerbate the problem.  According to a College Board report, 2011 saw an 8.3 percent increase in public tuition costs from the previous year.  When compared to a two or three percent inflation rate, the discrepancy is obvious – even gasoline costs are less volatile. Economists like Hoover understand the need for higher costs.

“The federal government discourages the high rate of increasing tuition costs, but it also demands that schools practice more monitoring, use more technology and offer more accommodations,” Hoover said.  “Of course, that all costs money, but I don’t think it amounts to 10 percent more tuition and fees.”

“The president wants schools to explain those costs, and I think that’s fair,” Hoover said.

Some aspects of the economy, however, don’t help the president’s cause.  States like Alabama are sinking deeper into debt and cutting costs – such as university subsidies – to slow the plunge.  Tuition is expected to make up the difference.  Moreover, Obama has threatened to withhold federal funding from state schools that don’t keep tuition costs in check.

While there are ways for states to lower the cost of public higher education, they come with tradeoffs.  In a January article by the Associated Press, Al Bowman, president of Illinois State University, expressed his concern:

"You could hire mostly part-time, adjunct faculty,” Bowman said. “You could teach in much larger lecture halls, but the things that would allow you to achieve the greatest levels of efficiency would dilute the product.”

That product of education is the same human capital Obama is trying to preserve.

“Higher education is not a luxury,” Obama said.  “It’s an economic imperative that every family in America should be able to afford.”

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