The second term: higher education and the Obama administration by William C. Smith

This is the second part of a three-part series that reflects and projects on the state of educational policy within the Obama Administration.  Part one of the series, a breakdown of the Obama Administrations K-12 policy and emphasis areas, can be found here[1].  The conclusion, which makes predictions for K-12 and higher education in the second term, can be found here[2].

Higher Education Policy in the First Term

The primary foci of the Obama Administration’s first term higher education policy involved increasing access to higher education and regulating for-profit colleges.  If K-12 education is re-designed to provide students with the skills to be “college and career ready”, access to higher education must be expanded to match the increase in college-prepared students.  Over the first term increases in access resulted from the largest investment in federal financial aid since the passage of the G.I. Bill[3].  As part of Obama’s monumental health care legislation, he was able to keep his promise to reduce subsidies to private student lenders[4].  By ending federal subsidies for private banks to administer student loans and shifting lending responsibility to the federal government, the administration was able to capture between $60 and $80 billion.  These funds were transferred to support an expansion of the Pell Grant program, access to and innovation in community colleges, and the restructuring of federal student loan repayment[5].

The Pell Grant, which provides interest-free funding for low income students, is central to Obama’s financial aid policy.  In his first two years in office Obama fought to increase the maximum Pell Grant award to $5,550 and his 2013 budget plans an additional increase to $5,635[6].  In addition to the value, the number of recipients of the Pell Grant has jumped sharply since 2008, increasing by 50% to nearly 10,000 beneficiaries[7].  Obama also used his executive and regulative authority to restructure student loan repayment[8].  Known as the “pay as you earn plan” and scheduled to go into effect in 2014, the new repayment formula would set student loan payment rates at 10% of net income and provide debt forgiveness after 20 years of continual, on time payment[9].

For-profit colleges have a history of setting tuition rates to match the maximum federal financial aid package available to their students, thus fulfilling their promise that students will not have to pay for the experience out of their own pocket.  The recent boom in for-profit colleges, however, has brought with it concerns about education quality and post-graduation success.  The Obama Administration has attempted to address these concerns through regulation.  The administration’s action is based on a phrase from the Higher Education Act that discusses the importance of providing “gainful employment in a recognized occupation”.  The clause pertains to all occupational education programs but is being used by the Administration to target for-profit colleges[10].  By linking “gainful employment” to an individual’s ability to repay their student loans, the federal government would cut off federal financial aid to for-profit colleges that fail to provide “gainful employment” – defined as three years of high default rates for graduates[11].  This first step in regulating higher education outcomes was challenged in the courts and the “gainful employment” measurement has been invalidated.  However, the court supported the underlying premise of holding colleges responsible for their students’ outcome, indicating that this piece of regulation is far from over.

Two noticeable failures during Obama’s first term include his inability to make a long term deal on student loan interest rates and the insufficient parceling out of teacher recruitment incentives to third parties.  Student loan interest rates, set at 3.4% by the Democratically controlled congress in 2007, were set to double last July.  Although that catastrophe was avoided, one that would have affected millions of students, the interest hike was not ameliorated but simply delayed until July of 2013.  Pushing the debate on student loan interest rates back a year did cost the government $6 billion[12], but simply delaying the discussion instead of forging forward with a long-term fix leaves students in a state of never-ending apprehension.  The Obama Administration’s has failed to live up to their promise of creating new “Teacher Service Scholarships”[13].  Although the administration originally hoped use these scholarships to attract the best and the brightest to the teaching profession by offering financial incentives, their actions have resulted in the deferment of recruitment to already established groups such as Teach for America[14].

Promises for the Second Term

Obama’s 2012 campaign rhetoric signaled a shift in higher education policy to tuition management with regulations expanding to public and non-profit colleges.  Within this policy agenda the administration has made three goals explicit.  First, “by 2020, America would once again have the highest proportion of college graduates in the world”[15]. Second, the government will recruit 100,000 math and science teachers over the next decade[16]. And third, the growth rate of college tuition, currently at 4.8%[17], will be halved over the next decade[18].  To accomplish these goals higher education has moved to the forefront of the education debate and the 2013 expenditure on higher education has been increased by 4.6% over the 2012 level, amongst the largest increases on the federal budget[19].  To ensure that students not only have access to but can attain a higher education degree, Obama put universities “on notice” in his 2012 State of the Union Address.  Over the past year, Obama’s administration has suggested that campus based aid be taken from those universities that are unable to keep their net price down and transferred to those that are.  This would be completed through the campus based Perkins Loan Program where colleges would be evaluated on three criteria: having a “responsible tuition policy”, providing “good value”, and having high enrollment and completion rates for low-income students.  As Libby Nelson of Inside Higher Education puts it, the real message is that “increased scrutiny and regulations aren’t just for for-profit colleges anymore”[20].