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Obama Proposes to Link Federal U.S. College Aid to Affordability

February 02, 2012

Jan. 27 (Bloomberg) -- President Barack Obama for the first time is proposing to link federal aid to colleges with the institutions’ ability to control tuition costs and maintain education quality.

“Colleges that can show that they are providing students with good long-term value will be rewarded with additional dollars to help students attend,” the White House said in a statement. “Those that show poor value, or who don’t act responsibly in setting tuition, will receive less federal campus-based aid.”

Obama is scheduled to speak on the subject at the University of Michigan in Ann Arbor later this morning.

For institutions that control costs, the administration is proposing to increase campus-based aid to about $10 billion a year, up from $1 billion. The bulk of the money, about $8 billion, would be devoted to Perkins loans for students, with other aid set aside for work study grants and Supplemental Educational Opportunity Grants.

The administration’s proposal calls for $1 billion to entice states to help keep costs down at public colleges while encouraging an overhaul of state programs that help finance education.

Obama is also proposing $55 million for individual colleges as an inducement to improve education quality.

Congress would be required to approve the changes, which will be spelled out in greater detail when the president submits his fiscal 2013 budget to lawmakers on Feb. 13.

In his Jan. 24 State of the Union address, the president warned colleges and universities that he was putting them “on notice,” adding: “If you can’t stop tuition from going up, the funding you get from taxpayers will go down.”

He said states need to make “higher education a higher priority in their budgets.”

--With assistance from John Hechinger in Boston and Roger Runningen in Washington. Editors: Leslie Hoffecker, Katherine Rizzo

To contact the reporters on this story: Julianna Goldman in Washington at; Kate Andersen Brower in Washington at

To contact the editor responsible for this story: Steven Komarow at

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