Q&A: What will candidates do on college costs?

Associated Press Modified: October 24, 2012 at 10:31 am •  Published: October 24, 2012

President Barack Obama has rallied college students at dozens of campuses, touted his record on student aid and needled Republican challenger Mitt Romney for advising students to "borrow money if you have to from your parents." Romney counters that despite the flood of federal financial aid unleashed during Obama's term, college costs and student debt have only grown.

The debate over rising college tuition is a microcosm of the broader debate over the economy: Obama argues he's taken bold steps that minimized the damage of a deep recession and will build for the future. Romney says the president's big-government interventions have backfired, and more private-sector solutions are needed.

Here are some questions — and answers — about the complicated landscape of college costs and the presidential campaign.

Q. What's happened to college costs under Obama?

A. They've gone up — a lot, at least at four-year schools. Since the 2008-2009 academic year in which he took office, the average public four-year college has increased its tuition list price 26 percent (beyond overall inflation). That's an increase of about $1,800, to $8,655, according to figures released Wednesday by the College Board. However, costs have been going up since long before Obama took office, and his term coincided with unprecedented college funding cuts by the states, which are spending 26 percent less per student on higher education than five years ago.

Largely because of a massive increase in federal aid under Obama, the net price — what the average student pays after accounting for grants and tax credits — has gone up considerably less than the sticker price. The net price is $2,910 this year, or $570 more than the year he took office. At community colleges, aid covers on average all costs.

Q. Can either candidate do anything about the increasing prices colleges are charging?

A. Both say they'll try. Obama has proposed a $1 billion "Race to the Top"-style contest to reward states for reforms, and said he could cut off aid to colleges that don't take steps to improve productivity. He's called for working with the states to cut tuition inflation in half within 10 years. A Romney campaign paper says Washington will no longer write a "blank check to universities to reward their tuition increases" and to support schools pursuing new models to drive down costs.

But the debate mostly concerns the enormous mix of federal aid programs for students, which will disburse about $175 billion this year in the form of grants and loans.

Q. What's Obama's record on student aid?

A. Obama can rightly claim he's transformed the federal financial aid system. Partly that means more money — Washington is on track to disburse almost $50 billion more this year than in 2008-2009. Spending on Pell Grants for low-income students has nearly doubled to about $35 billion, supporting about 10 million students, up from 6 million when he took office, and he successfully pushed Congress to postpone a scheduled doubling of the interest rate on subsidized Stafford loans.

But he's also made structural changes. Obama stopped subsidizing banks to make student loans, and now almost all student loans come directly from the government. Much of the estimated $60 billion in savings over 10 years is channeled back into other student aid programs. A new income-based repayment program caps loan repayments for 1.1 million recent borrowers at 15 percent of discretionary income and forgives their debts after 25 years. The program will soon become a 10 percent cap and forgiveness after 20 years.

Romney says the increased aid from Washington is driving up prices, arguing in a campaign position paper the president "returns over and over again to the old liberal playbook that has driven up tuition rates for decades."

Q. What did Romney do about college costs as governor of Massachusetts?

A. Romney has touted the John and Abigail Adams scholarship that started when he was governor, offering top Massachusetts public high school students free tuition at state universities. A recent Harvard study argues the program steered students to colleges where they were less likely to graduate, and may have confused recipients by promising "free tuition" but not covering mandatory fees, which are much higher than tuition at Massachusetts colleges. The report found the award is much less than similar state scholarships in places like Georgia and California.

Q. What would Romney do as president?

A. He's pledged to reverse Obama's "nationalization" of the federal student loan market and return private lenders to the process. He wants to consolidate what he calls "duplicative" student aid programs but hasn't specified which ones.

Romney education adviser Phil Handy, in a recent debate with an Obama counterpart, called the income-based repayment program a "creeping entitlement" but the campaign has not said publicly whether or how he would reform it. (A recent New America Foundation calls for reforms to the program so its benefits will be less weighted to higher earners).

Q. What about tax credits?

A. Obama wants to extend the American Opportunity Tax Credit, which provides about 10 million families a tax refund of up to $2,500 for tuition, fees and course materials. Romney's tax plan would allow that credit to expire and revert to the old HOPE tax credit, which is less generous to students and less expensive for the government. Unlike HOPE, the AOTC is partly refundable, meaning low-income students can benefit even if they don't owe taxes.

Some education finance experts have criticized the AOTC, arguing other programs channel benefits more effectively to the neediest students. Obama campaign policy director James Kvaal counters it's important to help middle-class families afford college as well as the low-income students who use Pell Grants.

Q. What is the problem with Pell Grant funding and what will the candidates do about it?

A. Pell is the main college aid program for low-income students. The awards are given on a sliding scale, and only about one-third of recipients receive the maximum (currently $5,550). Typically those who get the maximum are the very poorest students (more than 90 percent come from families earning under $30,000).

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