1. Archive

Obama outlines incentive plan to reduce tuition costs

ANN ARBOR, Mich. — President Barack Obama offered a plan Friday to reduce the costs of higher education by increasing the amount of federal grant money available in low-interest loans and tying it directly to colleges' ability to reduce tuition.

In an impassioned speech before 4,000 students at the University of Michigan, Obama delivered an election-year pitch to the type of youthful audience that buoyed his 2008 campaign, saying his administration was putting colleges "on notice" that they must rein in soaring prices.

"You can't assume you'll just jack up tuition every single year," Obama said to cheers at Glick Field House, the school's indoor football facility. "If you can't stop tuition going up, your funding from taxpayers will go down. We should push colleges to do better; we should hold them accountable if they don't."

Obama's proposal would significantly boost federal investment in the Perkins loan program from $1 billion to $8 billion and revamp the formula for distributing the money. Under the plan, colleges would be rewarded based on their success in offering relatively lower tuition prices, providing value and serving low-income students, the White House said.

The administration also is proposing to provide $1 billion in aid to states that curb higher education costs and to create a competition that provides $55 million in startup funding for higher education institutions to pursue innovation to boost productivity.

Most of the plan would require congressional approval, however, and Republicans have objected to adding expensive new proposals at a time of spiraling national debt. White House officials said the Perkins loan portion of the president's plan would not cost taxpayers additional dollars because students pay off the aid money with interest.

Obama's appearance in Ann Arbor was the final stop of a three-day tour of five battleground states that aimed to build public support for the goal laid out in his State of the Union address this week of building an economy that offers more equity and opportunity for the middle class.

That message will frame the president's re-election argument, and his focus on taming higher education costs echoes one of the central concerns of the Occupy Wall Street protests over the past year.