A Better Solution For Federal Education Spending & Controlling Future Tuition Increases


As Obama and Romney lay out their plans for Federal Education Funding Reform, I thought it would be a good time to summarize the two sides of the issue so that my fans, followers, and connections can decide for themselves.

Full Disclosure:  I will, as always, give my opinion on the issue, which happens to be a non-partisan policy suggestion.

Fast Facts

Four-Year College costs have risen 72% above the rate of inflation over the past decade.

According to the Bank of New York, Americans owe over $900 billion in student loans

The average American borrower owes over $24,000 in student loans

Democrat View

To combat rising costs, President Obama has proposed raising the Maximum Pell Grant award (a program which costs American Taxpayers approximately $36 billion each year) from $5,500 to $5,635 next year.  He would also extend the “American Opportunity” tax credit (which he originally enacted in 2009) at a cost of $13 billion dollars each year.

Republican View

Romney/Ryan would hold the Maximum Pell Grant Award at $5,500/year, and push for more private loans instead of federal loans, thinking this would lower rising costs over the long term (though they do not spell out exactly how that logic plays out).

Conclusion

The real problem here is that colleges have not been held accountable to keep their costs under control.  Obama’s strategy attacks a side-effect of this problem, by trying to give students more money to counter the effects of the rising costs, but his strategy ignores the actual issue of rising tuition costs.  Romney’s strategy is largely undefined, and seems to be aimed at lowering total federal spending on education, but it is not clear on how this will improve the situation.

Better Solution – Only Offer Federal Loans For Colleges Who Keep Tuition Steady

We should not offer federal loans to students attending universities who continue to raise their tuition…PERIOD.

In short, if a college raises their tuition year over year, every one of their students should instantly become ineligible for federal student loans the following year.  If this were to happen, thousands of students would likely have to face a decision on whether to transfer schools.

Wait, wouldn’t this hurt the students and not the universities?  Absolutely not!  And here’s why…

How hard do you think this would make universities work to control costs and keep their tuition costs steady?  Suddenly, colleges would be forced to control costs, budget more effectively, and keep tuition rates steady year over year.  The Federal Government could help students more with this simple, cost-free rule change than it ever will by throwing money at side-effects of the actual problem.

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About Todd Hagopian (@ToddHagopian)

Todd Hagopian received his BA from Eastern Michigan University with a major in Political Science. After graduation, he worked as a Financial Advisor and a Bank Manager before returning to school. He attended Michigan State University, where he completed an MBA with a double-major in Finance and Marketing. Todd is now a Senior Product Development Manager for a Fortune 500 company. He frequently writes about business issues, social media strategy, and political issues that he finds important. Enjoy the blog!

Posted on September 1, 2012, in Politics and tagged , , , , , , , , . Bookmark the permalink. 1 Comment.

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