Promoting college success and completion is critical to the future of our economy. Recent studies have shown that we are lagging behind nations such as Korea, Canada and Japan in college completion rates – and college costs are part of the reason why. President Obama believes educational success is key to our future economic success. That’s why he has set a goal of once again having the highest proportion of college graduates in the world by the year 2020.
We understand the financial barriers that students face today, so our Administration has worked to expand college access and opportunity by making college more affordable. And already we’re seeing results.
Today, the College Board released a report that shows that the net price of tuition -- the cost after grant aid and tax benefits -- is lower than it was five years ago, thanks largely to our investments in Pell and the GI Bill. The new American Opportunity Tax Credit -- formerly known as the Hope Credit -- has lowered college costs even further. By cutting out the middle man and shifting towards a direct lending system, we’ve been able to pass on billions of dollars of savings to students. And we have overhauled the student aid application to help more students get the help they need.
However, we know more work needs to be done, and colleges need to do their part by focusing on their mission of providing a quality education at an affordable cost. The same report shows that tuition has increased by 7.9% at state public four-year colleges and 4.5% at private four-year colleges. At the University of Austin, TX, President Obama touched on the rising costs of college tuition and the need for an all-hands-on-deck approach to lowering tuition:
Part of the responsibility for controlling these costs falls on our colleges and universities. Some of them are stepping up. Public institutions like the University of Maryland, University of North Carolina, some private institutions like Cornell, they’re all finding ways to combat rising tuition without compromising on quality. And I know that your president is looking at some of these same approaches to make sure that the actual costs of college are going down. I want to challenge every university and college president to get a handle on spiraling costs.
So university administrators need to do more to make college more affordable. But we, as a nation, have to do more, as well. So that’s why we fought so hard to win a battle that had been going on in Washington for years, and it had to do with the federal student loan program.
See, under the old system, we’d pay banks and financial companies billions of dollars in subsidies to act as middlemen. See, these loans were guaranteed by the federal government. But we’d still pass them through banks, and they’d take out billions of dollars in profits. So it was a good deal for them, but it wasn’t a very good deal for you. And because these special interests were so powerful, this boondoggle survived year after year, Congress after Congress.
This year, we said, enough is enough. We said we could not afford to continue subsidizing special interests to the tunes of billions of dollars a year at the expense of taxpayers and of students. So we went to battle against the lobbyists and a minority party that was united in their support of this outrageous status quo. And, Texas, I am here to report that we won. We won.
So as a result, instead of handing over $60 billion in subsidies to big banks and financial institutions over the next decade, we’re redirecting that money to you, to make college more affordable for nearly 8 million students and families across this country. Eight million students will get more help from financial aid because of these changes.