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Obama budget seeks increase in aid to college students

BY NICOLE ABER
Daily Staff Reporter
Published March 4, 2009

For students dependent on loans and lines of credit to pay for college, a lockdown on the nation’s financial markets has made it increasingly difficult to access private funding for education in recent months.

To maintain college accessibility in light of the country’s credit problems, President Barack Obama has laid out plans for an expansion to federal grant and loan programs in his proposed budget presented to Congress on Feb. 26.

The Obama administration reiterated its commitment to higher education in a statement released by the White House yesterday.

“A lack of financial resources should never obstruct the promise of college opportunity,” according to the statement. “And it’s America’s shared responsibility to ensure that more of our students not only reach the doors of college, but also persist, succeed, and obtain their degree.”

The budget proposes to expand the Federal Perkins Loan Program from $1 billion to $6 billion per year. The number of colleges and universities participating in the program would increase from 1,800 to 4,400. The University of Michigan already takes part in the Perkins Loan Program.

Mike Boulus, executive director of the Presidents Council State Universities of Michigan, said the increase in direct federal loans will be more beneficial for students than loans currently offered by banks and private companies facing crises during the current economic downturn.

“The more money available for loans and grants, the greater opportunities students will have because the more federal dollars available, guaranteed from the federal government, the less students will have to rely on private loans which are becoming very, very scarce right now,” Boulus said.

Terry Stanton, public information officer for Student Financial Services at the Michigan Department of Treasury, also said the increase in federal loans is important during the current time as banks and private lenders struggle to generate capital.

“There were a number of financial institutions issuing student loans, and a number of states wrapped up in their programs or suspended programs, Michigan included, because of the credit crunch,” he said. “The federal government stepped in to ensure that students had the appropriate loans to attend college.”

According to the University’s Office of Financial Aid, for the 2007-2008 school year there were 2,818 borrowers of private loans, which totaled $52 million.

In addition to the increase in federal funding for grants and loans, the budget proposal includes a $500 million grant program to create partnerships between federal, state and local governments. This will aim to improve retention and graduation rates for low-income students, according to a press release.

Mark Kantrowitz, publisher of FinAid.org, a financial aid information website, said the proposal would also guarantee increased funding for Pell Grants. This should decrease the strain on students by allowing the program to keep pace with inflation, he said.

“It puts pressure on colleges to start controlling their costs, because if they know the Pell Grants are only going to go up by so much, then it means that they’ll either have to control their costs or find other sources of funding to help the students if the college costs go up even faster,” he said.

According to FinAid.org, college tuition rates increase at about twice the general inflation rate. Numbers on the website show tuition rising at about 8 percent per year on average, which leads to college tuition doubling every nine years.

U.S. Rep. John Dingell (D-Mich.) said he also supports Obama’s efforts to increase the federal direct student loan program, as they would provide more reliable loans for students.

“The White House has proposed improving the federal student loan program so that students will have guaranteed access to student loans, protecting students and their families from any fluctuation in the financial markets,” Dingell said in an e-mail interview. “Like President Obama, I believe our students should not suffer as a result of turmoil in the market."

LSA senior Emily Golen, who is receiving $5,500 a year in Perkins Loans and $1,000 a year in Pell Grants, said she is in favor of the increase in federal aid because it would help her pay for educational costs beside the cost of in-state tuition.

“If it would have been there before I was a senior, then I think it would have helped,” Golen said. “Because predominantly I got loan money, not necessarily to pay for tuition, but to pay for other supplies. And the money that I’ve gotten has not completely covered that, so I think that if it was increasing it would help definitely.”

State Rep. Pam Byrnes (D-Lyndon Township) said she supports the budget proposal because it will make college more affordable in the current economic recession.

"I am excited to see President Obama's commitment to higher education," Byrnes said in an e-mail interview. "I support his efforts to mandate funding for the Pell Grant program and to restructure the federal Perkins Loan Program toward need-based aid. Making college more affordable is a critical component to Michigan's economic turn around."


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