April 11, 2013
President Obama's highly anticipated proposed budget for the 2014 fiscal year, released on Wednesday, includes several measures to increase student financial aid and college affordability, reported The Chronicle of Higher Education.
One major change that the budget would bring to the financial aid system is implementing market-based student loan rates, Reuters explained. Once the rate is set, it would stay fixed for the loan's lifetime. The Chronicle of Higher Education noted that this plan also includes a "Pay as You Go" measure, meaning that students would not have to pay more than 10 percent of their discretionary income. Moreover, any outstanding debt after 20 years of payment would be forgiven.
Reuters stated that the push for change comes at a time when student loan debt is skyrocketing. Americans owe a total over $1 billion in student loans, and per the Federal Reserve Bank of New York, delinquency rates have also significantly risen over the course of the last eight years. Furthermore, as The Chronicle of Higher Education revealed, come July, students will experience a doubling in subsidized student loan rates -- to 6.8 percent -- unless Congress takes action.
The president's plan, however, may not be the best solution to the country's student-debt problem, The Chronicle of Education points out. The plan does not set a cap on interest rates -- a consequence that, as student-advocacy groups worried, "risks spiking the cost of college for future generations." In response to this concern, Carmel Martin, who serves as assistant secretary for the Department of Education's Office of Planning, Evaluation, and Policy Development, argued that implementing a cap would actually result in an even higher charge for current students.
The student loan rate was not the only issue addressed in the budget. Other financial aid provisions included an increase in Federal Work Study spending by $150 million and a $140 rise in the maximum Pell Grant to $5,785. Obama also aimed to increase funding for the perennial Perkins Loan program from $1 billion to $8.5 billion. He proposed using the extra funds as a reward to colleges that offered a "good value" education, helped low-income students, and successfully worked to keep tuition down.
While addressing educational quality, Obama expanded on a measure that he had touched on in his State of the Union address - better career preparation for students. He proposed grants to help colleges and employers collaborate to "better equip graduates for the demands of a high-tech economy." Specifically, the budget would grant $300 million for a "High School Redesign Program." Under the program, school districts would develop partnerships with businesses, nonprofits, and postsecondary institutions, with the goal of providing students with "career-related experiences" and college credit.
Diverse Issues in Higher Education mentioned that, according to Education Secretary Arne Duncan, the overall goal of the budget is to reduce a "stubborn opportunity gap" in education. As Duncan stated, "Strategic investments in our educational system will not only provide more opportunities for millions of Americans, but they will strengthen our nation's workforce as well."
Compiled by Aneesha Jhingan
"Obama Administration's 2014 Education Budget Proposal Boosts Pell Grant, Seeks Interest Rate Changes," diverseeducation.com, April 10, 2013, Charles Dervarics
"Obama proposes market-based interest rates for student loans," reuters.com, April 10, 2013, Elvina Nawaguna
"Obama's Budget Would Increase Pell Grants and Add Incentives on Some Student-Aid Money," chronicle.com, April 10, 2013, Kelly Field