Obama’s new college plan can make college affordable, should target low-income students

President Barack Obama recently proposed the America’s College Promise plan to make community college free for two years, a proposal which could benefit millions of students and help reduce student loan debt. 

The Tennessee Plan, which pays for community college tuition not covered by federal grants for qualified students in Tennessee, inspired the America’s College Promise plan. President Obama’s proposal differs from the Tennessee plan by covering the full tuition cost for all students, even those who receive federal grants such as Pell grants. Under the proposal, the federal government would cover seventy-five percent of the community college’s tuition and the participating state would absorb the difference. Students who receive federal grants could use them for other college costs, like supplies, fees, and living expenses. The tuition waiver is dependent on the student maintaining a grade point average of 2.5 or higher, attending the college at least half-time, and progressing towards degree completion.  

There are currently over one trillion dollars of federal and private student loan debt. While  more students are going to college, the recession put a damper on job creation, making it hard for students to find jobs that allow them to repay their loans. Repaying student loans is especially challenging when students don’t receive a high-quality education that would open doors to good jobs.

Student loan debt is not just an issue of accumulating large amounts of debt, but also of being unable to repay it after graduation. Some students with relatively small amounts of debt still struggle to repay it, especially if their education doesn’t translate into better employment. President Obama’s proposal to make two years of community college free would help reduce the amount of debt students have to borrow. In addition, the proposal could provide an incentive for students to choose community colleges over for-profit colleges, which tend to be a more expensive option.

During a session at an Illinois Asset Building Group conference, Woodstock Institute’s senior policy and communications associate Katie Buitrago presented data showing that students at for-profit colleges took on more debt, were more likely to take out private student loans (which have fewer repayment options), were less likely to graduate, and those that did graduate experienced fewer employment options than graduates of non-profit or public colleges. While the majority of students take out loans for college, for-profit college students took out loans at much higher rates; for example, 66 percent of white students at non-profit colleges take out loans during their college career while 85 percent of white students at for-profit college take out loans. Some employers do not consider hiring for-profit college graduates if their programs lack the right credentials, and several universities do not allow credits from for-profit colleges to transfer, giving these students very limited opportunities in the job market and for further post-secondary education. This situation becomes even more troublesome when the students’ loans come out of their grace period. For-profit college graduates made up 11 percent of students in 2009-2010, but accounted for over 40 percent of loan defaulters two years after graduation. America’s College Promise would make community colleges more appealing for students and may help decrease the likelihood of students borrowing unaffordable debt at for-profit colleges.

Woodstock Institute supports reducing unsustainable student debt and expanding access to affordable education. An article in Inside Higher Ed notes that the America’s College Promise proposal faces some hurdles. For example, the plan still requires cooperation from states to cover the 25 percent of tuition not covered by the federal government. Also, while this proposal increases the appeal of community colleges over for-profit colleges, low-income students face the most struggles while attending college. For low-income students, the net cost of for-profit colleges is $24,173, while community colleges’ net cost is $8,065. Woodstock recommends that the Administration modify the America’s College Promise proposal to primarily benefit low-income students. 

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