“By 2020, America will once again have the highest proportion of college graduates in the world.”
President Barack Obama
Creating a clear path to the middle class and ensuring our nation’s economic prosperity means opening the doors of higher education to more Americans. Today, three-quarters of the fastest-growing occupations require education and training beyond a high school diploma. Yet nearly half the students who begin college in this country don’t finish within six years. And tuition continues to rise, putting college out of reach for the very families that need it most to join the middle class. A generation ago, America led the world in college attainment of young adults; now, we rank 13th. The Obama administration is committed to restoring our world leadership in college completion and ensuring that every student has access to an affordable and high-quality postsecondary education.
College is More ImportantBut More ExpensiveThan Ever Before
A postsecondary credential has never been more important.
In today’s economy, higher education is no longer a luxury for the privileged few, but a necessity for individual economic opportunity and America’s competitiveness in the global economy. At a time when jobs can go anywhere in the world, skills and education will determine success for individuals and for nations. As a result, a college education remains the best investment a student can make in his or her future.
- College graduates with a bachelor’s degree typically earn 66 percent more than those with only a high school diploma; and are also far less likely to face unemployment.
- Over the course of a lifetime, the average worker with a bachelor’s degree will earn approximately $1 million more than a worker without a postsecondary education.
- By 2020, an estimated two-thirds of job openings will require postsecondary education or training.
Studentsincluding many older students juggling work and family responsibilitiesrecognize that higher education is a key to opportunity, and that has fueled a substantial increase in college enrollment rates in recent years. But unfortunately, for millions of other students, our higher education system isn’t delivering what they need, or deserve. In part because of the rising costs of college, too many students are unable to enroll or complete high-quality degrees.
College has never been more expensive.
- Even as a college degree or other postsecondary credential or certificate has never been more important, it has also never been more expensive. Over the past three decades, tuition at public four-year colleges has more than doubled, even after adjusting for inflation.
- Between 1992 and 2012, the average amount owed by a typical student loan borrower who graduated with a bachelor’s degree more than doubled to a total of nearly $27,000.
- Even after historic investments by the Obama Administration, the maximum Pell Grant covers only about 30 percent of the cost of a four-year public college educationthe lowest proportion in history and less than half of what it covered in 1980. Despite that fact, Congressional Republicans have proposed to cut the real purchasing power of Pell Grants even further.
Too many recent college graduates feel the weight of their student loan payments holding them back from fulfilling their full potential. And far too many prospective college students feel as though they are simply priced out of the education they need to set themselves up for future success. There is a significant opportunity gap as well. While half of Americans from high-income families hold a bachelor’s degree by age 25, just 1 in 10 people from low-income families attain that level of education. Moreover, regardless of income status, high-school graduates who enroll in college too often fail to finish: barely half will complete their degree in a reasonable time at four-year institutions; and at two-year schools it’s only about a third.
Today, college remains the greatest driver of socioeconomic mobility in America, but if we don’t do more to keep it within reach for middle-class families and those striving to get into the middle class, it could have the opposite effectserving as a barrier, instead of as a ticket to the American Dream. Every hard-working student deserves a real opportunity to earn an affordable, high-quality degree or credential that offers a clear path to civic engagement, economic security, and success.
Historic Investments in College Affordability
Since taking office in 2009, the Obama Administration has taken strong action to counteract the rising cost of higher education, expanding Pell Grants and making student debt more manageable by expanding loan repayment options that cap payments based on income. Putting in place the largest investment in higher education funding since the GI bill, the Administration has increased total annual aid to students by over $50 billion from 2008 to 2016, and selected annual tax benefits by over $12 billion, which has helped our nation ensure more students are graduating college than ever before.
- In 2010, the Obama Administration and Congress made a landmark investment in Pell Grants, ending student loan subsidies for private banks and shifting over $60 billion in savings back to students and taxpayers.
- This Administration has raised the maximum Pell Grant award by more than $1,000 since 2008, and for the first time, tied it to inflation. Under the President’s leadership, the number of Pell Grant recipients has expanded by one-third over that same time, providing college access to millions of additional low-income and middle-class students across the country.
- The Administration also established and extended the American Opportunity Tax Credit to assist families with the costs of college, providing up to $10,000 for four years of college tuition, which has helped 10 million students and families afford college.
- Last year, the President unveiled his America’s College Promise proposal to make two years of community college free for responsible students to earn critical workforce skills and the first half of a bachelor’s degree at no cost.
The Administration also has worked to help Americans manage their student loan debt. In addition to fighting to reduce student loan interest rates, saving students up to $1,000, the Administration has improved and expanded income-driven loan repayment options, ensuring that all Direct Loan borrowers can cap their payments at ten percent of their discretionary income and that loan payments are manageable. As late as mid-2012, fewer than a million borrowers were in income-driven repayment plans. The Administration’s expansion effort has nearly quadrupled participation, and delinquencies and defaults are down.
Doing More to Focus on Student Outcomes
Cost and debt are only part of the storywe need increased focus on student success.
Addressing growing college costs and debt is absolutely critical. Many more students need access to vastly more affordable and quality higher education opportunitiesincluding tuition- free degree options. For too long, though, America’s higher education system has focused almost exclusively on inputsenrolling students in collegeand too little on outcomesgraduating from college with high-quality degrees. We must reset the incentives that underpin the system so the focus is on the outcome that matters: completing a quality degree at a reasonable cost. Otherwise, we will merely be finding better ways of paying for an unsustainable status quo.
The most expensive education is one that doesn’t lead to a degree.
While graduating with high levels of debt is holding too many borrowers back from reaching their full potential, the even more damaging outcome is for students who take on debt but never complete their degree. In fact, students’ ability to repay their loans depends more strongly on whether they graduate than on how much total debt they take on.
- Students who take out college loans but don’t graduate are three times more likely to default than borrowers who complete.
- The median debt of borrowers who default is under $8,900, which is barely half of the median debt load for all students.
- States with the highest default rates for their four-year colleges tend to be near the bottom on completion rates too; and states with the lowest default rates tend to rank higher in four-year completion rates.
- More than 40 percent of first-time, full-time students who enroll in a bachelor’s degree program don’t graduate within 6 years.
- Low-income students, first-generation college students, and minority students, in particular, are being underserved by the current system. Just 9 percent of students from the lowest income quartile graduate with a bachelor’s degree by age 24, compared to 77 percent for the top income quartile.
- Students from low-income families are also less likely to enroll in and complete college than their peers, even when academic ability is taken into consideration.
The Obama Administration is Shifting the Conversation Toward Outcomes
Over the past seven years, the Administration has pursued executive actions and put forward policy proposals to address structural flaws in the higher education system and create incentives for all actors to focus on student outcomes:
- Through its landmark Gainful Employment regulations, the Obama Administration is stopping the flow of federal dollars to low-performing career college programs that leave students buried in debt with few opportunities to repay it.
- And in 2015, the Department announced executive actions and legislative proposals to strengthen accreditation, the stamp of approval that colleges need before accessing federal financial aid. Together, these actions build on the work that the Administration has done to ensure that higher education institutions are effectively serving students and families while staying accountable to taxpayer dollars.
- The Administration also has proposed encouraging students to complete their studies on time by strengthening academic progress requirements in federal student aid programs.
- The Administration has greatly increased transparency for students and families so that they can make informed decisions through tools like the College Scorecard and the Financial Aid Shopping Sheet and choose a school that is affordable, best-suited to meet their needs, and consistent with their educational and career goals. The College Scorecard, in particular, represents the next generation of college transparency: providing students and families with more data than ever before to help them compare college costs and outcomes as they search for the college that is right for them.
Much Work Remains for All Involved
Despite the Administration’s historic actions and the leadership of innovative institutions, much work remains to meet our goal of once again having the highest proportion of college graduates in the world. The Administration will continue to act within its power to improve college access, affordability, and completion, but we also need Congress, states, colleges and universities, and accreditors to join in that effort.
We must encourage states to reverse a quarter-century-long trend of disinvestment in higher education, promote reforms to support student success, and embrace their role in overseeing institutions. Thirty states already fund institutions to some extent based on performance indicators and several others are transitioning to such systems. We need to build on that momentum and progress.
States also must align their secondary and postsecondary systems, reform remedial education, and ensure seamless transitions into college and among institutions by making it easy to transfer credits. And they must take seriously their historical role in consumer protection through a robust authorization and oversight process, as well as active monitoring of compliance of institutions doing business in their state.
We must encourage accreditors to focus on student outcomes, raise the bar for quality, and promote transparency. Accreditors must offer new levels of transparency and quality assurance based on outcomesnot just inputs.
We must encourage institutions to improve their performance by recognizing and rewarding colleges with strong student outcomes, especially with the neediest students, and incentivizing underperforming colleges to improve. All institutions and systems must do more to control costs and innovate to make degrees more affordable, and focus on their success rate with students who have traditionally been least likely to complete their programs and degrees. And for those that are ultimately more concerned about their bottom lines than about their students, we should stop the flow of taxpayer dollars.
In addition to supporting these needed changes, Congress must do more to protect students from unscrupulous career colleges that deceive students into taking on debt they will never be able to repay and then stick taxpayers with the bill. We must strengthen, not weaken, accountability in higher education. For too long, Congress has sat on the sidelineor worse, actively foughtthe Administration’s efforts to protect students and taxpayers from these predatory and deceptive practices. While urging Congress to act, the Department has taken additional steps in the past year to offer greater safeguards for students and better support for borrowers.
Support for Higher Education in the Fiscal Year 2017 Budget
The 2017 budget continues on the path of helping to ensure that students can attain a postsecondary credential without taking on more debt than they and their families can afford. It also supports an ongoing shift toward focusing on student outcomes in higher education, and, in particular, completion, so that both students and the nation can thrive in the global economy. As a result, the 2017 budget includes proposals to address college access, affordability, and completion:
- Funding America’s College Promise (ACP): A new partnership with states, this effort would provide $61 billion over the next decade to make two years of community college free for responsible students, so they can earn the first half of a bachelor’s degree or an associate degree at no cost. ACP also would fund grants to four-year Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs) to provide new low-income students and minority students, including community college transfer students, with up to two years of college credits at zero or significantly reduced tuition.
- Strengthening and expanding access to Pell Grants. The President plans to:
- Ensure full funding for the Pell Grant maximum award (estimated at $5,935 in award year 2017-2018) and to continue indexing the grant to inflation indefinitely, to protect and sustain its value for future generations.
- Encourage on-time and faster completion through the Pell for Accelerated Completion program, by making Pell Grant funds available year-round to students who are taking a full course load and have exhausted their award.
- Offer an additional $300 On-Track Pell Bonus for students who take at least 15 credit hours per semester, and are on course to complete college on time.
- Implement the Second Chance Pell program, enabling prisoners eligible for release to receive Pell Grant funds and access postsecondary opportunities that will help them rejoin society, get good jobs, support their families, and strengthen their communities.
- Launching an HBCU and MSI Innovation for Completion Fund: A new $30 million competitive grant program would support innovative, evidence-based, student-centered strategies to increase the number of low-income students and students of color who earn their degrees.
- Creating a College Opportunity and Graduation Bonus program: This initiative aims to reward colleges that successfully enroll and graduate significant numbers of low-income students on time, and encourage better system-wide performance.
- Advancing innovation through the First in the World initiative: A third round of funding, at $100 million, would enable more partnerships to implement and evaluate promising or proven strategies to increase college success for all students, including low-income, minority, and first-generation learners, including up to $30 million for HBCUs and MSIs.
- Creating an American Technical Training Fund: Through this $75 million effort, jointly administered by the Departments of Education and Labor, partnerships will develop or expand tuition-free, innovative, evidence-based short-term or accelerated job training programs in high-demand fields like health care, manufacturing, and information technology.
- Simplifying the FAFSA by eliminating burdensome and unnecessarily complex questions to make it easier for students and families to access federal student aid and afford a postsecondary education.