Election campaign delivers big bucks

September 21, 2007

As the battle for the 2008 US presidential election heats up, suddenly everyone wants to pour money into higher education. Jon Marcus explains.

Hats, T-shirts, coffee mugs and other paraphernalia bearing the legend "1.20.09" are appearing all over the US.

It stands for January 20, 2009 - the last day of the George W. Bush presidency - and the people who sport it on their chests, heads and car bumpers are expressing impatience for the date to arrive.

It is still more than a year until voters get to choose a Bush successor. But that is not a particularly long time in US politics. If there has been a sign of how near the election is, it was the Congress vote earlier this month in Washington for the largest increase in government aid to university students since returning GIs were given free higher education after the Second World War.

Under the College Cost Reduction and Access Act, the maximum annual amount of direct grants to needy students will rise by more than 30 per cent over the next five years. Interest rates on student loans will be cut in half, and graduates who go into public service professions, such as teaching, firefighting and policing, are promised that their debt will be forgiven. Mr Bush, who had earlier threatened to veto the measure, did a U-turn and said that it was what he had wanted all along.

It was, at least in part, an attempt by both the Democratic and Republican parties to position themselves for the election. It was also an explicit acknowledgment that, as the presidential campaign becomes seemingly ubiquitous, an unlikely issue has finally risen to unprecedented political prominence: the spiralling cost of attending university in the US.

"This bipartisan consensus for an increase of this magnitude is something no one would have predicted," said Patrick Callan, president of the National Center for Public Policy and Higher Education.

"You had this surprising bipartisan coalition that almost looked like a bidding war, with both sides trying to up the ante."

The outbreak of unanimity is perhaps less surprising in the face of growing public frustration over the affordability of higher education. While family income has increased 170 per cent since the early 1980s, the price of a US university education has risen 375 per cent.

In a national poll conducted by Mr Callan's centre, nearly 80 per cent of Americans said that students have to borrow too much money to pay for their university educations. Two thirds said that many qualified and motivated students are prevented from receiving a higher education because of the cost. More than three quarters of parents said that they were worried about their ability to pay for university.

The middle class is hardest hit by the soaring costs of tuition, since it is neither poor enough to qualify for direct financial aid nor rich enough to afford to pay outright for a private university education that now costs as much as $45,000 (£22,300) a year at many schools. The middle class is also America's largest single voting bloc.

Little surprise, then, that as the presidential election nears, the two major political parties are suddenly falling over each other to make more money available for students. Even before it became a major issue in the presidential campaign, university affordability was beginning to percolate into last year's gubernatorial and congressional election campaigns.

Democrat George Miller, chairman of the House Education Committee, said that the Republicans in Congress cut $12 billion from student aid programmes last year, which he said the Democratic-controlled Congress has now almost entirely restored.

"We took $11.39 billion and put it back into Pell grants [the principal direct government grants]," Mr Miller told reporters. "That's the difference an election makes."

But Paul Ryan, the leading Republican on the House Budget Committee, said the changes will cost taxpayers billions of dollars, despite Democrats' assurances that the money will come from a reduction in government subsidies to private companies that provide loans to students.

"This is a cynical attempt to make good on a campaign promise," Mr Ryan said.

It also may not accomplish what the politicians hope. The Pell grants will increase over the next five years, but they are for low-income students.

Middle-class families will benefit most from the reduction in the interest rate applied to student loans from the current 6.8 per cent to 3.4 per cent, phased in over four years.

Neither of these measures actually does anything to tackle directly the biggest complaint of voters, namely the cost of university tuition. More than half of Americans now agree that universities "are like a business", caring mostly about their own bottom line rather than educational values, while 81 per cent say that waste and mismanagement are "very important" or "somewhat important" factors in driving up university costs.

The growing political pressure may mean that the Government's next target will be universities and their tuition charges, according to experts such as Mr Callan.

"This Pell grant [increase] is a huge and positive development, but I don't think it's going to be enough to alleviate the problem," Mr Callan said. "It will be interesting to see if what Congress has done is simply going to take the heat off for a few years."

The downside, he said, is that it may encourage colleges and universities to think they can "proceed with business as usual".

"What they ought to be concerned about is that if we don't see some real improvements as a result of this increased public investment, they're likely to be facing the regulatory pressures they fear the most, from both the Congress and the states."

At least one presidential candidate is already proposing something along these lines. Democratic Senator Christopher Dodd has said he would embarrass universities whose tuition increases exceed a specified tuition-inflation index by publishing their names annually on a list as a means of pressuring schools to hold down costs.

Other candidates are promising even more financial aid for students. John Edwards, a Democratic former senator from North Carolina, proposes making one year of public university tuition-free for students who fulfill certain requirements and work part-time.

Senator Hillary Clinton would double spending on government programmes that help low-income students prepare for university.

Republican Congressman Ron Paul would make all undergraduate tuition fees and living expenses tax-deductible. All would use government money to accomplish these things.

"My sense is that this issue has become more salient," Mr Callan said about the subject of university affordability in politics. "The concern about student debt is really increasing. It seems to me that there will never be as much money as higher education could probably spend or that it thinks it deserves. But we've seen a significant investment here that's not likely to be repeated, and if additional public investment doesn't solve the problem then we're going to be back to talking about regulatory solutions."

HOW FINANCIAL SUPPORT FOR US STUDENTS IS CHANGING

Interest rates on needs-based government student loans will be cut in half over the next four years. The cost to the Government will be covered by reducing the subsidies it pays to private lenders that provide student loans.

The principal direct student grant - the Pell grant - will be increased from the current $4,050 (£2,000) a year to $5,400 over the next five years.

Graduates who work for ten years or more in public service professions, including teaching, firefighting and the police, will have their loans forgiven and monthly payments on federally backed loans will be limited to 15 per cent of the borrower's discretionary income.

The bill passed the Senate 79 to 12, and the House 292 to 97. Some Republicans, whose supporters include student lenders, objected to reducing the subsidies.

After initially threatening a veto, President Bush has not only embraced the changes but also taken credit for them. His Education Secretary said that Congress had "answered the President's call to significantly increase funding" for grants to needy students.

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