Campaigns differ on how to help with college costs

[October 01, 2008]  WASHINGTON (AP) -- The price of college continues to surge, and financial aid isn't keeping up. The Wall Street meltdown has hammered the stock market and college savings. And a college degree is ever more essential for finding a good job.

No wonder polls show voters want to know what, if anything, the two presidential candidates would do to make college more affordable.

Democrat Barack Obama and Republican John McCain have offered similar campaign pronouncements: A college education should be affordable to anyone, and the process of getting federal aid is more complicated than it should be.

But there are differences in how each would tackle the problem.

Obama's proposals are more detailed -- and more expensive. They reflect an assumption that government should do more to help students pay for college.

McCain's proposals are more general and emphasize streamlining the aid system -- improving but not necessarily expanding it. He calls for making more information available to parents and eliminating wasteful spending on pork-barrel university research projects.

Both candidates pledge to simplify financial aid.

A look at their proposals in some key areas:

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NEW AID PROGRAMS

The most sweeping proposal by either candidate is Obama's call to provide most students with up to $4,000 a year in tax credits for college, in return for 100 hours of community service.

The Obama campaign says the plan would make two major improvements over the programs that it would replace -- the HOPE and Lifetime Learning tax credits, which provide at most $2,000 annually.

First, it would be fully refundable, so low-income families who don't pay enough in taxes to benefit from the full tax credit could still get $4,000. Second, aid would be awarded based on prior-year tax data, so families wouldn't have to fill out lengthy federal aid forms and face a long wait to find out how much aid they can get.

Unlike Obama, McCain isn't proposing new programs to help with college costs, but a senior adviser says the GOP candidate is committed to helping families, especially low-income ones, pay for college.

The adviser, Douglas Holtz-Eakin, said McCain's approach uses taxpayer dollars more responsibly.

"We don't have any new college proposals in terms of massive expansions of funding," he said. "There is a budgetary reality; we have enormous spending pressures already. It would be irresponsible to go to every interest group and promise them lots of money. The other campaign does that. We don't."

Obama adviser Danielle Gray said all of Obama's education proposals are paid for by cutting other federal programs, contracting and procurement reform, and eliminating spending on special projects pushed by members of Congress. The campaign puts the cost of the expanded tax credits at $10 billion.

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PELL GRANTS

For low-income students, Pell Grants, which don't have to be repaid, are the most important federal aid program. This year 6 million students -- virtually all with family incomes under $50,000 -- will receive Pell Grants of up to about $4,700.

Because they target the neediest, Pell Grants are widely considered among the most effective aid programs. But over the past 20 years, demand has vastly outstripped supply. The maximum Pell Grant used to cover more than half of the cost of an average four-year public university; now it covers about one-third.

Congress has increased the maximum authorized Pell Grant, but in practice the increase is meaningless unless Congress and the next president fully fund the program -- something that hasn't happened for 30 years.

Obama pledges that Pell Grants will "keep pace" with increases in the cost of college. McCain does not commit to specific increases but would consider raising Pell awards if there is a pressing need and the budget allows, Holtz-Eakin said.

With the economy slumping, and Washington committed to a massive Wall Street bailout, the next president will be hard-pressed to maintain Pell levels, let alone increase them. A Bush administration official recently told Congress that Pell applications are running 10 percent higher than a year ago, and paying for the program may require spending increases of $6 billion -- about 50 percent -- next year.

STUDENT LOANS

About $60 billion -- nearly half of all public and private student-aid money -- comes via the federal student loan program. The candidates have a major philosophical difference over how it should operate.

Currently, there are two parallel systems -- students can borrow directly from the government, or take out loans from banks and other private lenders that are subsidized by the government.

Obama, who often mentions that he only recently finished paying off his own student loans, proposes moving the whole system to direct government loans and eliminating subsidies to banks. Last year, Congress made substantial cuts to those subsidies but did not eliminate them.

McCain, who attended the U.S. Naval Academy, which is free of charge, supports the dual system of government and private loans. Supporters of the current system say it provides competition that helps students, and say the federal government would be hard-pressed to administer the full program.

In some ways, the debate already has shifted. Experts point out that during the recent credit crisis, the government stepped in to prop up the subsidized lending program, so in practice the two programs already are merging.

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COLLEGE PRICES

A recent survey by the College Savings Foundation found that one in four parents want the federal government to cap college costs. Neither candidate plans anything like that, or even smaller steps such as forcing schools to spend more from their endowments to hold down prices. That's a relief to colleges, which resent interference from Washington.

The reasons why college prices are rising are complicated, and largely beyond the purview of the White House. Washington provides $86 billion annually in grants, loans and tax benefits to support students, but it's state budgets that mostly determine public colleges' list prices.

Critics say colleges share the blame, for failing to curtail their own spending. Families also bear some responsibility: While they gripe about rising prices, in the end, many still choose more costly schools. That could change in a prolonged economic downturn.

Michael Dannenberg, senior fellow with the New America Foundation and a former adviser to Sen. Edward Kennedy, D-Mass., says Obama's proposals take the problem of college affordability more seriously than McCain's. And he calls the tax credit a significant innovation.

"McCain's message when it comes to increased tuition is, 'You're on your own,'" said Dannenberg, who has not worked for Obama's campaign. "Obama's message to families is, 'We'll give you more financial aid to help you with college costs, but your kids are going to have to help others.'"

But Richard Vedder, an Ohio University professor affiliated with the conservative American Enterprise Institute, believes more spending on federal aid -- such as what Obama proposes -- will just encourage colleges to charge more. (However, as a member of Education Secretary Margaret Spellings' higher education commission he signed on to recommendations that included more money for Pell Grants).

"I think this is just going to fuel the academics race rather than restrict it," Vedder said. Spending more on aid means "treating the symptoms and not the disease."

[Associated Press; By JUSTIN POPE]

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