The president’s plan would tie federal campus financial aid to tuition increases. Universities that cannot keep tuition increases down would see a reduction in their federally-funded campus-based aid programs (work study, Perkins loans, and Supplemental Education Opportunity Grants for low-income students). This type of aid accounts for about $3 billion, less than 2 percent of the $142 billion awarded to higher education annually.
The Obama plan would also create a $1 billion higher education Race to the Top program, increase Perkins loans from $1 billion to $8 billion, and award $55 million in a “first in the world” efficiency competition. The president said that he would like colleges and universities to offer more accurate information about net cost, graduation rates, and post-graduate employment opportunities to students and their families.
The proposed changes require Congressional approval.